Anti-Trust Office hands out million-crown fines: How to avoid problems with supplier contracts?
In the past year, the Office for the Protection of Competition conducted numerous on-site investigations concerning significant market power, involving e.g., hotel restaurants, wholesalers, and non-food e-shops. The office focused on whether they complied with their obligations stipulated by the amendment to the Act on Significant Market Power.
We comment on the important amendment to the Act on Significant Market Power, in force from 2023, here. Until 2023, the law only applied to a few large retail chains. The amendment then significantly broadened its scope of application, so that the law now covers the entire supply chain (Farm to Fork (F2F) Strategy). Buyers with a turnover of more than EUR 2 million should take note, as the law may now also apply to them. Apart from introducing a broad list of prohibited unfair commercial practices, the amendment also makes it compulsory to conclude a contract for the supply of goods or services in writing and stipulates other mandatory requirements for the contract. It also prohibits the due dates of invoices from exceeding 30 days.
As part of its sectoral investigation, the office inspected more than 500 businesses and read more than 4,000 supplier contracts. They discovered that businesses in some sectors (e.g. hotel restaurants, producers and sellers of wine and spirits or meat and meat products, etc.) have little awareness of the law and its new rules. Breaches were thus numerous and repeated.
The most frequent shortcoming was the failure to comply with the 30-day deadline for payment of the purchase price. The office also found instances of non-compliance with the requirement for contracts to be in writing and in the terms and conditions not being in accordance with the law. The office therefore initiated administrative proceedings with 15 businesses, imposing fines e.g. on Heineken Czech Republic, Jan Becher – Karlovarská Becherovka and Košík.cz, the latter being fined CZK 1.8 million.
A breach of the law may indeed have serious consequences for businesses, as the office has the power to impose fines of up to 10% of net turnover. Given the way turnover is calculated, this may especially for large businesses come to tens or even hundreds of millions of crowns, which is a risk not to be underestimated. The Polish Competition Authority, for example, fined the Biedronka retail chain over PLN 506 million, i. e. more than CZK 3 billion, under similar legislation.
The office let it be known that in 2025 they will continue to monitor compliance with the obligations arising from the Act on Significant Market Power. We therefore recommend that businesses check whether the law applies to them and whether their contractual relations with suppliers need to be revised. Early prevention can protect against unnecessary fines and lengthy administrative proceedings. If you are unsure whether your contracts and terms and conditions comply with the requirements of the law, please do not hesitate to contact us.