Amendment to the Act on Significant Market Power

On 30 November 2022, an amendment to the Act No. 395/2009 Coll., on significant market power and unfair commercial practices in the sale of agricultural and food products, was published in the Collection of Laws under No. 359/2022 Coll., effective from 1 January 2023.

Its wording primarily transposes the EU Directive 2019/633 on unfair commercial practices between businesses in the agricultural and food supply chain. The main novelty is the extension of the concept of significant market power to the entire supply and procurement chain.

Legislation before the amendment

Previously, only a retail chain with an annual turnover exceeding CZK5 billion could have significant market power over its suppliers. So the law only affected around 10 to 12 retail chains.

Legislation after the amendment

After the amendment, any customer in the whole chain will have sufficient market power if its turnover exceeds EUR2 million (CZK50 million) and at the same time exceeds the turnover of the supplier. Small and medium-sized agricultural and food businesses are expected to benefit most from the change in the law, which will now affect more than 800 businesses – a big change from the original situation.

Another positive change is that buyers with significant market power will no longer be able to use certain practices against their suppliers that the law identifies as unfair. These are practices that grossly deviate from good commercial practice or are contrary to good faith and fair dealing, for example where one business partner unilaterally imposes contractual obligations on the other. The stronger contracting party will not be able to unilaterally dictate terms to the weaker contracting party and shape the business relationship solely for the benefit of its own economic interests.

If a buyer uses any of the illegal practices against suppliers, it may be fined up to CZK10 million, or up to 10% of its net turnover, which is a big enough threat even for large corporations. The powers of the Office for the Protection of Competition, which supervises compliance with the law, have been considerably expanded by the amendment.

Here are some of the key changes introduced by the amendment:

• A buyer that asks an agricultural or food supplier for money for advertising that has not been agreed in advance faces a heavy fine.

• It’s prohibited to cancel an order for agricultural or perishable food products less than 30 days before the delivery date.

• It’s also considered an illegal practice for a trader to charge a farmer or food producer the cost of investigating a consumer complaint without the supplier having committed any illegal act.

• The law also explicitly requires all contracts to be in writing, regulates certain elements of contracts and sets a 30-day deadline for invoices.

Sellers of food and agricultural products are not the only ones affected by the amendment. The changes also apply to pharmacies, drugstores, petrol stations and DIY stores. The amendment also clarifies the definition of agricultural and food products, which now include feed, flower products, live animals and tobacco. That means pet stores, tobacco shops, and flower shops are also affected.