• The Contracts, that have been used by Polmlek so far, were not beneficial for milk suppliers.
• Following the intervention of the President of the Office of Competition and Consumer Protection, the Company changes the terms and conditions of cooperation.
• During the process of modifying the contracts, the Company shall not enforce the contractual provisions challenged by the President of the UOKiK.

Four years ago, the Act on Unfair Use of Contractual Advantage in Trade of Agricultural and Food Products came into force. One of the first interventions by the President of the UOKiK, undertaken based on the aforementioned act, concerned the market for the procurement of milk. As a result, a report on practices applied by the largest dairies was published, which indicated practices of milk purchasers that raised concerns of the UOKiK, and which defined desirable directions of actions in the field of shaping commercial relations with their suppliers.

Adjustment of contracts by Polmlek

The milk market is closely monitored by the President of the Office of Competition and Consumer Protection. Recently, contracts used by Polmlek, which is one of the largest companies in the dairy industry in Poland, in cooperation with its suppliers have been examined. According to the information provided by the entrepreneur, cooperation with a considerable part of suppliers is based on contracts, the content of which does not meet the requirements of the President of the UOKiK.

With regards to the contracts that was used by Polmlek, the President of the Office raised the following objections, i.a.:, the exclusivity clause (the necessity to ensure that produced milk is supplied exclusively to the Company), the method of determining prices, no regulations regarding the procedure of quality control and the possibility to verify the results.

As a result of the intervention of the President, the Company undertook to amend its contracts with suppliers within an agreed time frame. Moreover, the President of the UOKiK expects the cooperation of the Company with all suppliers to be based on new terms and conditions, even before the formal change of contracts.

- Polmlek declared to abandon the practices that could constitute an unfair use of contractual advantage. The Company has intensified the process of amending old contracts with its suppliers according to the provisions of the new contract, in line with the expectations of the UOKiK. What is important, until the process of amending the contracts is completed, Polmlek shall not enforce the contractual provisions that we questioned by the UOKiK, and shall ensure that all suppliers have the possibility to use the rights resulting from the new contract.  In the event that the Company fails to change its practices, which are unfavorable to farmers, it faces a financial penalty - up to 3 % of the annual turnover - says Tomasz Chróstny, the President of the Office of Competition and Consumer Protection.

Four years in force of the act on unfair use of contractual advantage

On 12 July 2017, the President of the UOKiK was granted the power to intervene in the event of unfair actions implemented by a stronger contracting party in the agricultural and food supply chain. Since then, the President has instituted 16 proceedings regarding practices unfairly exploiting contractual advantage. As a result, the President of the UOKiK has issued 8 decisions on unfair practices. Following 5 of them, business entities were required to take appropriate action to avoid penalties. In 3 cases, the decisions provided for the imposition of financial penalties, the total amount of which was PLN 733,390,212.09. Additionally, more than 70 investigations were initiated and more than 90 speeches were made, addressed to business entities, regarding practices unfairly exploiting contractual advantage.

Changes in regulations

In 2021, works are underway on the implementation of the EU Directive on Unfair Commercial Practices in the Agri-Food Market. The draft law - which is in the final stage of the government legislative process - indicates 1 November 2021, as the effective date of the new regulations.

The goal is to combat, in a more effective way, practices of unfair use of contractual advantage. The draft law includes many solutions that have been proposed by the President of the UOKiK. Those include, first of all, an absolute prohibition on the unjustified reduction of the amount due for the supply of agricultural or food products after it has been accepted by the purchaser, in particular, as a result of a request for a discount. The above shall allow for a more effective counteracting the procedure of offering unfair discounts applied to suppliers of agricultural or food products.

The scope of application of the Act is also to be expanded. From the point of view of entities who operate in the milk procurement market, it is particularly important to cover with the Act contracts for the purchase of agricultural or food products delivered to cooperatives by its members, given the important role which this form of business organisation plays in the milk market.

The proposed solutions also include the possibility for the President of the UOKiK to provide a significant view on the matter, which shall constitute legal support to an entrepreneur or a farmer in the event of a court dispute with a large contractor from the agri-food industry. This is an opportunity for farmers and small and medium-sized entrepreneurs to pursue their claims, in a more effective way, if they suffered damage due to practices of unfair use of contractual advantage by the largest entities in the agri-food market. 

Additional information for the media:

UOKiK Press Office
Pl. Powstańców Warszawy 1, 00-950 Warszawa, Poland
Phone +48 695 902 088, +48 22 55 60 246
E-mail: [SCODE]Yml1cm9wcmFzb3dlQHVva2lrLmdvdi5wbA==[ECODE]
Twitter: @UOKiKgovPL