Contractual advantage: new rules for agricultural and food trade in Poland
10th August 2017
The Act: counteracting unfair use of contractual advantage
The Counteracting Unfair Use of Contractual Advantage in Trade of Agricultural and Food Products Act (‘the Act’) came into force on 12 July 2017. The new Act provides additional powers for the President of the Office of Competition and Consumer Protection (OCCP) but raises many concerns for businesses affected by the new regulations (i.e. suppliers and buyers of agricultural and food products), especially because of vague notions used in the Act. Practical problems caused by the vague language are further compounded by the fact that the provisions of the Act introduce wholly new concepts to the legal system of Poland. Businesses impacted by the Act therefore face considerable uncertainty as to how the President of OCCP will enforce the new laws.
The Act applies to contracts between suppliers (e.g. agricultural producers or intermediaries) and buyers (e.g. retail chains, restaurants or processing plants), and prohibits unfair use of a contractual advantage in this type of business relationship.
The President of the OCCP can now decide whether suppliers or buyers have gained an unfair advantage from the contract. The President can request relevant information or inspect the company’s premises and use this evidence during an investigation. Investigations can be instigated if total sales volume between the parties of a contract exceeds PLN 50,000 or if the party’s group of companies as a whole, exceeds PLN 100 million.
The Act lists a number of examples of practices that may amount to unfair use of a contractual advantage. They include, without limitation:
- unreasonable termination or threatened termination of contract (e.g. forcing new conditions of supplies by threatening to terminate the contract)
- awarding the right to terminate the contract to one party only
- making the contract or its continuation dependent on other non-contractual consideration (e.g. charging fees for acceptance of goods for sale, fees for opening a new outlet or expenses for product disposal)
- unreasonable extension of payment terms (e.g. contesting an invoice issued for apparently non-existent errors)
The primary sanction for unfair use of a contractual advantage is a fine that the President of the OCCP can impose on businesses even if infringements were unintentional; fines can be up to 3% of the total turnover.
For more information on how this new Act may impact your business or operations in Poland please contact Marta Gadomska-Gołąb or Dr. Aleksandra Kunkiel-Kryńska.