• Last Thursday, a new Contractual Advantage Act went into effect.
• The changes introduced will improve the situation for farmers and product suppliers in their dealings with the major players in the agri-food market.
• The Office of Competition and Consumer Protection has prepared a summary of the most frequent questions and answers concerning the new regulations.

The President of UOKiK may intervene in cases of unfair use of contractual advantage in the agri-food market since 2017. Based on the Act in force, 16 proceedings on unfair contractual advantage practices have been initiated, resulting in ten decisions on unfair practices so far. Over 90 requests were also issued to entrepreneurs on practices unfairly exploiting contractual advantage. The total fines amounted to over PLN 800 million.

The current amendment to the regulations results from implementing the EU Directive 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain. The main objective of the new Act and the existing legislation is to eliminate unfair trade practices targeting, for example, farmers or suppliers of products to large retail chains.

- Once the Act comes into force, we will continue our existing efforts to improve the situation of weaker players in the agri-food market. The new regulations are substantially in line with current practice. At the same time, they introduce changes that will make it easier to fight unfair practices and thus will reduce the number of violations occurring on the market – says Tomasz Chróstny, President of UOKiK.

New solutions

New features include a presumption relating to the concept of "significant disproportion in economic potential" or a catalogue of unfair practices for which there is no need to examine whether they are contrary to good practice and threaten or infringe a material interest of the other party. 

- Thanks to the experience gained over the several years that the current Act has been in force, I have also proposed solutions that are necessary for the Polish market. I am thinking, for example, of the possibility of the President of UOKiK presenting a substantive opinion on the matter. This solution, which we apply, e.g. in consumer protection cases, will be legal support for an entrepreneur or a farmer in a court dispute with a large contractor from the agri-food sector – says Tomasz Chróstny, President of UOKiK.

A significant change introduced on the initiative of the President of the Office will also be 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. This will stop large retail chains from imposing commercial discounts on their suppliers for deliveries already made, which have not been agreed on in advance.

Questions and answers on contractual advantage

In connection with the entry into force of the Act, UOKiK has prepared information on the provisions on contractual advantage and the practices of the Office in the form of questions and answers. Some of them are presented below:

1. What is contract advantage? Is the possession of such an advantage prohibited?

The contractual advantage is connected with a significant disproportion in the economic potential between contracting parties.
 There is a presumption included in the Act that such disproportion occurs if one of the contractual parties exceeds a specific annual turnover threshold, depending on the turnover achieved by the economically weaker contractual party.

For example, if the supplier's annual turnover does not exceed the equivalent of
 EUR 2 million, then the buyer whose annual turnover exceeds this amount will have an advantage over the supplier.

2. What are absolutely prohibited practices (the so-called "black" practices)?

Absolutely prohibited practices include:

• cancellation of an order by the buyer less than 30 days before the expected delivery date of perishable agricultural or food products;
• requiring the buyer to pay the supplier for deterioration or loss of agricultural or food products that occur on the buyer's premises or after the products have passed to the buyer for reasons not attributable to the supplier;
• threatening or taking commercial retaliation measures against the supplier when the latter is exercising his rights under the contract or the law;
• unjustifiably reducing the amount owed for the supply of agricultural or food products after the buyer has accepted them in full or in part, in particular by demanding a discount.

3. What are the permitted practices under the Act (the so-called "grey" practices)?

According to the Act, "grey" practices are permitted as long as they have been clearly and unambiguously agreed in advance in a contract between the buyer and the supplier.

Indicated practices include but are not limited to:

1. the return of unsold products by the buyer to the supplier without payment for those products or their disposal;
2. charging the supplier with a fee as a condition for storing, presenting or offering for sale its products or making such products available on the market;
3. requiring the buyer to pay the supplier all or part of the cost of price reductions on products sold by the buyer as part of a promotion organised by the buyer.

If you are a farmer or entrepreneur operating in the agri-food industry and your large contracting partner abuses its contractual advantage by imposing unfavourable terms of cooperation, please do not hesitate to notify UOKiK. We have prepared a special form to help you report any irregularities. Click here to fill it out: https://ankieta.uokik.gov.pl/formularz-przewaga-kontraktowa

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