Abuse of contractual power – changes are coming.

The Minister of Agriculture and Rural Development presented a draft of a new act on counteracting unfair use of contractual advantage in trade in agricultural and food products.

It is intended to be a completely new legal act, implementing the solutions of Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain. However, many of the solutions used to date have been included in the draft of the new act, so it should not be treated as a complete ‘earthquake’.

Below we present a summary of the most important changes that the draft law will introduce, if it is adopted in its current form.

  • The existing law applied only to contracts for the purchase of agricultural or food products concluded between purchasers of these products and their suppliers. The draft extends its scope to other factual or legal activities carried out in connection with these contracts. This is intended to help cover a wider range of practices that did not previously fall under the ‘umbrella’ of the President of the Office of Competition and Consumer Protection (e.g. return or demand for a price reduction for goods already delivered to the purchaser).
  • The draft bill explicitly defined what the legislator understands by ‘significant disproportion in economic potential in the case of practices that unfairly exploit contractual advantage’, which until now could have raised doubts as a condition for the application of the Act. In this regard, the legislator explicitly indicated the financial thresholds on which the existence of such a disproportion in potential depends. These thresholds have been defined in sufficient detail and at a fairly low level (albeit in a very diverse manner) to enable the President of the Office of Competition and Consumer Protection to take action not only in cases of the greatest importance to the market.
  • The legislator has indicated what, in particular, may constitute unfair exploitation of contractual advantage (the lack of a detailed calculation in this regard was the Achilles' heel of the previous Act). In this regard, it was indicated, among other things, that unfair exploitation of contractual advantage consists in particular of:

a) the purchaser paying the supplier after 30 days from the end of the agreed period of delivery of agricultural or food products, during which the products were delivered, or from the date of determining the amount to be paid for that period of delivery of products (or after exceeding other deadlines specified in the draft),

b) the buyer cancelling an order less than 30 days before the expected delivery date of agricultural or food products which, due to their nature or characteristics, are perishable and cannot be consumed or processed within 30 days of their collection, production or processing;

c) unilateral change by the purchaser of the terms of the contract regarding the frequency, method of performance, place, date or quantity of delivery of agricultural or food products or a single delivery of agricultural or food products, quality standards for agricultural or food products, payment terms or prices

d) reducing the amount due for the delivery of agricultural or food products after their acceptance by the purchaser in whole or in the agreed part, in particular as a result of a request for a discount;

e) the purchaser's request to the supplier for payments not related to the sale of agricultural or food products;

f) refusal by the purchaser to confirm in writing the terms of the contract between the purchaser and the supplier, which the supplier has requested to be confirmed in writing;

g) unlawful acquisition, use or disclosure by the purchaser of the supplier's trade secrets;

h) the threat of commercial retaliation or the taking of such action against the supplier if the supplier exercises its rights under the contract or under the law;

i) the return by the purchaser to the supplier of unsold agricultural or food products without payment for those products or for their disposal;

j) charging the supplier a fee as a condition for storing, displaying or offering for sale its agricultural or food products or making such products available on the market,

k) the purchaser requiring the supplier to bear all or part of the costs of price reductions on agricultural or food products sold by the purchaser as part of a promotion organised by the purchaser,

l) the purchaser requiring the supplier to pay for the advertising of agricultural or food products by the purchaser.

  • Interestingly, some of the practices (in particular those relating to marketing activities undertaken by retail chains) will not be considered unfair exploitation of contractual advantage if they are explicitly mentioned in the contract and recognised by the purchaser and supplier as permissible, and if the contract additionally states that their use will not be considered unfair exploitation of contractual advantage.
  • Importantly, all practices included in the catalogue specified by the legislator will be automatically considered by the President of the Office of Competition and Consumer Protection (UOKiK) to be prohibited, and for this purpose, the authority will not have to prove that they are unfair (i.e. contrary to good practice and threatening or infringing on the significant interests of the other party).
  • Introduction of a procedure for voluntary submission to a financial penalty, which will allow for a reduction of any financial penalty by up to 50%.

The above changes should be assessed as an attempt to streamline the current practice of the President of the Office of Competition and Consumer Protection (UOKiK) in the area of unfair use of contractual advantage. Given the wide range of practices considered prohibited, it should be assumed that the activities of the President of UOKiK in this area will become even more visible than before. The first decisions issued under the new Act should outline the direction of action in this area.

According to the assumption, the Act should enter into force on 1 May this year. It is therefore necessary to quickly analyse the templates of contracts concluded and the adopted practice in order to revise them before the above-mentioned date. Importantly, however, entrepreneurs do not need to rush to amend contracts that have already been concluded. According to the draft, the new Act will apply to existing contracts only from 1 May 2022. This leaves a year for preparations in this regard.

Back to list