New Act on contractual advantage – food market

Unfair use of the contractual advantage on the agricultural-food market by retail chains is a problem that suppliers have been facing for years. Due to the necessity of implementing into Polish law the provisions of the EU Directive 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain, a new Act of 17 November 2021 on counteracting contractual advantage in trade in agricultural and food products entered into force. On 23 December 2021 it replaced the previously applicable Act of 2016.

Contractual advantage

The contractual advantage is the presence of significant disproportion in economic potential of the buyer against the supplier or supplier against the buyer. The Act introduces a presumption of a significant disproportion by indicating the thresholds for the annual turnover of entities that are subject to assessment.

Blacklisted and greylisted practices

Unfair practices have been divided into the so-called blacklisted practices which are absolutely prohibited and greylisted practices which may be used under certain conditions.

Blacklisted practices include i.a. delaying payments, cancelling orders in less than 30 days for perishable products, unilateral change of contract terms by the buyer, unjustified reduction of fees after accepting the goods (discount requests), requesting fees not related to the sale of products, unlawful obtaining, using or disclosing the supplier’s trade secrets by the buyer or threatening to take trade retaliation or taking such action against the supplier if the supplier exercises its rights under the contract or law.

For example, the return of unsold products without payment or requesting additional payments for advertising and marketing of the supplier’s products if they were clearly and unambiguously agreed in the contract between the buyer and the supplier, will not be considered to be unfair practices (greylisted practices). Covering by the supplier part or all of the reduction in product prices in connection with the promotion organised by the buyers is in turn allowed, provided that the contract between buyer and the supplier was concluded before the expected date of the promotion and contains provisions specifying the date of promotion, its duration and the quantity of agricultural product that will be covered by the promotion.

Perishable products

Another novelty is the definition of perishable products which, in the light of the Act, are agricultural or food products which, due to their nature or processing stage, may no longer be suitable for sale or processing within 30 days of their collection, production or processing.

Financial liability

Importantly, liability for unfair practices, including fines imposed by the President of the Office of Consumer and Competition protection, is also provided for in the event of inadvertent action.

As before, the fine imposed on the supplier or buyer by way of decision may amount to up to 3% of the turnover achieved in the financial year preceding the year in which the fine is imposed.

Adaptation of distribution agreements

Distribution agreements concluded before 23 December 2021 must be adapted to the new regulations by 30 April 2022. Agreements concluded the date of entry into force of the new act must meet the conditions set out in it.