Amendment brings greater protection for farmers and food producers

The Act on Significant Market Power protects suppliers against food supply chains abusing their position in connection with the purchase of food or the provision of related services. So far, the law has applied mainly to large customers, i.e., those whose turnover from the sale of food and related services in the territory of the Czech Republic in the last accounting period exceeded CZK 5 billion.

Under the amendment, transposing into Czech law the EU Directive on Unfair Trading Practices in Business-to-Business Relationships in the Agricultural and Food Supply Chain, the law will now apply to the entire supply chain. Instead of the current rebuttable presumption of the existence of a significant market power, the law now sets strict turnover limits for suppliers and customers above which the customer is automatically regarded to have a significant market power. The amendment thus significantly expands the range of entities to which the law applies (it may now also apply, e.g., to customers with turnover just above CZK 50 million, i.e., EUR 2 million).

The amendment also contains a broad list of unfair business practices that are prohibited between a customer with significant market power and its supplier, further specifying some of the existing ones and defining new ones; e.g., the false indication of the country or place of origin of an agricultural product or food product may now be penalised. Furthermore, customers will not be allowed to cancel orders for perishable agricultural or food products less than 30 days before their delivery. It will also be prohibited to make supplies conditional upon using third-party services whose conditions and price are set by the customer.

The form and essentials of the contract between the customer and the supplier are also regulated in more detail. The contract must be concluded in writing before the commencement of supplies or services. It must contain information about the price, subject of purchase, service or specification of a special price/promotion, if so agreed. The customer will also be obliged to hand over to the supplier at least one copy of the contract immediately after the conclusion of the contract.

Compliance with the law will be supervised by the Office for the Protection of Competition. It may impose a penalty for its violation, even repeatedly. However, the aggregate amount of the penalties may not exceed CZK 10 million or 10% of net turnover.

We recommend that all entrepreneurs in the agriculture and food industry who may now be subject to the law make sure that their supplier-customer relationships are set up correctly and, if necessary, renegotiate them as soon as possible.