In December 2016 the Competition Protection Commission fined Kaufland Bulgaria EOOD for abuse of stronger bargaining power regarding its supplier, Keti-94 OOD. This is the second commission decision relating to abuse of bargaining power – a concept introduced into Bulgarian legislation in July 2015.
Proceedings were initiated by Keti, a small alcohol company licensed in Bulgaria and a long-term partner of Kaufland. Keti specified that, at the date of the investigation, it worked only with Kaufland and exported an insignificant part of its produce to other EU member states.
During the investigation, the commission established that after 2015 Kaufland followed certain commercial behaviours regarding its supplier Keti – which was a result of Kaufland's stronger bargaining power – and thus contradicted genuine trade practice. In particular, the commission found that Kaufland unilaterally and without economic justification imposed a decrease in supply prices on Keti via the imposition of bonuses, discounts and annual premiums. Further, Kaufland suspended offering Keti's products in 2015, which continued until Kaufland's unilateral termination of its relationship with Keti in breach of the contractual arrangements between the parties.
The commission further established that during most of the investigated period Keti was selling to Kaufland at prices below production costs due to the high bonuses imposed by Kaufland (which, added to the excise duty taxes, meant that Keti operated at loss). In the same period, Kaufland realised a high profit from its partnership with Keti. A comparative analysis with other alcohol suppliers showed that Keti's supply prices were the lowest when compared to the other distributors. However, Kaufland's profit realised from the Keti partnership was the highest when compared to the other distributors operating on the market.
Given the initial and ongoing costs for maintaining a commercial relationship with Kaufland, the commission found that Keti was impeded from finding alternative retail chains where it could distribute its alcohol products. Hence, Keti was found to be in a situation of commercial dependency with Kaufland.
The commission considered Kaufland's earlier behaviour from 2014, since this affected the commercial relationship between the parties in 2015 (ie, following the adoption of the concept of 'stronger bargaining power' into the law).
The commission found the breach to be severe and imposed a 7% fine generated from Kaufland's turnover on the market for sales of low-priced alcohol.
For further information on this topic please contact Galina Petkova at Advokatsko Druzhestvo Andreev Stoyanov & Tsekova in cooperation with Schönherr Rechtsanwälte GmbH by telephone (+359 2 933 1072) or email (firstname.lastname@example.org). The Advokatsko Druzhestvo Andreev Stoyanov & Tsekova website can be accessed at www.schoenherr.eu.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.