The Competition Protection Agency recently published the results of a survey on unfair trading practices in the food supply chain, which the agency conducted among suppliers of food products, including producers, purchasers, processing companies and intermediaries. Despite the small number of responses, the agency obtained some useful information on the functioning of the Slovenian food market.
Unfair trading practices in the food supply chain are regulated in the Agriculture Act(1) and are defined as practices imposed by one contracting party with significant market power (evident from the volume or value of sales) on another party contrary to good business practices – in particular:
- the failure to comply with the prescribed payment deadlines; or
- the imposition of unfair conditions, including:
- additional payments, discounts, promotions or other services;
- unfair delivery terms;
- countertrade under uncompetitive conditions;
- additional payments in order to reach or fail to reach certain sales levels;
- the unconditional return of unsold goods; and
- charging another contracting party the costs for missing inventory or thefts.
The agency is supervising the implementation of the respective provision of the act.
The aims of the survey were to:
- gain more comprehensive insight into allegedly unfair trading practices between suppliers and retailers;
- establish possible unfair trading practices in the food supply chain; and
- obtain information or data to initiate proceedings against alleged violators.
The survey was sent to 559 suppliers of food products, but only 61 responded. This could be because they were afraid that responding would lead to a loss of business or, on the contrary, because they do not see this problem as a pressing issue. Still, the agency concluded that the market response signifies that there are unfair trading practices in the food supply chain.
The unfair practice most commonly indicated by respondents was the failure to comply with prescribed payment deadlines, followed by the imposition of additional payments. The agency described as unfair retailers' practice of charging costs to suppliers which are not reflected in the service performed or from which the supplier does not gain a mutual benefit. These practices include, among others:
- charging for activities that were not agreed in the contract;
- reimbursing services that were not provided or that were provided but were not agreed on by the parties in writing;
- paying purchase promotional prices for goods outside the promotion period;
- returning delivered but unsold goods in cases where the retailer regularly orders larger quantities than actual sales made;
- charging costs after the delivery and acceptance of goods (eg, damages, thefts, logistical and storage costs);
- charging compensation for a drop in the retailer's turnover, sales or margin due to reduced sales of certain goods; and
- retailers requesting that suppliers not sell goods to other retailers at lower prices.
The food supply chain affects all consumers on a daily basis. Before a good reaches the consumer, a number of market participants add to its value and influence the final price paid by the consumer. Therefore, special attention should be paid to unfair trading practices by all market participants.
In addition, the agency called for better and more transparent regulation of the unfair trading practices in the act. In particular, 'significant market power' and 'imposition' should be defined more precisely, which would help the agency to establish certain practices as unfair and take appropriate action against violators.
For further information on this topic please contact Urša Kranjc at Schoenherr Slovenia by telephone (+386 1 200 09 80) or email (firstname.lastname@example.org). The Schoenherr website can be accessed at www.schoenherr.eu.
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