Competition authority imposes fine on retailer for abuse of significant market power

On 4 December 2020 the Office for the Protection of Competition (the office) announced in a press release(1) that it had imposed a Kc32 million (approximately €1.2 million) fine on Czech retail chain HRUŠKA, spol sro for an alleged abuse of significant market power. The decision is not final and an appeal has been filed.

According to the press release, the retail chain allegedly violated the Significant Market Power Act (SMPA) by fully transferring all business risks and losses associated with the sale of goods nearing their expiration date to dozens of its suppliers between 2016 and 2019. The retail chain was said to have provided its suppliers with a so-called 'full service', within which it demanded that suppliers reduce the price of goods already in stock if their expiration date was near. If these goods were not sold before the expiration date, a corrective invoice was issued to suppliers. As a result, suppliers had to return part of the money for the goods to the retail chain. According to the SMPA, a retail chain commits an offence by negotiating or exercising a right to return purchased food, except for a material breach of contract. Hence, the office concluded that the abovementioned practice falls under this provision.

In addition to the fine imposed, the retail chain was requested to:

• inform its food suppliers in writing of the contents of the office's decision within 14 days of the decision becoming final; and
• remove the full-service provision (under which the party to the proceeding could return goods to the supplier before the expiration date or lower the purchaser's price of the stock nearing its expiration date) from contracts with its food suppliers within six months of the decision becoming final.

The decision is the first SMPA-related decision of the office to be issued in 2020 after the Constitutional Court declared the 3% limit on marketing payments set by the SMPA to be unconstitutional (for further details please see "Constitutional Court upholds Act on Significant Market Power but declares 3% limit on marketing payments unconstitutional"). Nonetheless, the office is expected to actively fight unfair trade practices in 2021, with an amendment to the SMPA in the pipeline and a new chair who has stated his admiration for the practices of the German Federal Cartel Office.

For further information on this topic please contact Claudia Bock at Schoenherr by telephone (+420 225 996 500) or email (c.bock@schoenherr.eu). The Schoenherr website can be accessed at www.schoenherr.eu.

Endnotes

(1) Available here (in Czech only).