Kaufland Hrvatska fined 1.1 million Kuna for imposing unfair trading practices

The Croatian Competition Agency (CCA) fined Kaufland Hrvatska k.d. (Kaufland) 1.1 million Kuna for a serious breach of the provisions of the Act on the prohibition of unfair trading practices in the business-to-business food supply chain (UTPs Act). The CCA opened ex-officio administrative proceeding within the meaning of the UTPs Act investigating whether Kaufland made use of its superior bargaining position by imposing unfair trading practices relating to the content and the implementation of the agreement that it concluded with its supplier. Concretely, the CCA found that the agreement that Kaufland concluded with its supplier did not contain a provision defining the term i.e. the duration of the agreement in a clear and unambiguous manner, which is in contravention with the UTPs Act and therefore constitutes an unfair trading practice.

The analysis of the agreement that the supplier concluded with Kaufland indicated that Kaufland agreed a rebate for delivery to the central warehouse in contravention with the provision UTPs Act defining that at the place of delivery all risks and responsibilities related to the agricultural or food product are transferred to the re-seller, this despite the fact that Kaufland actually has only one place of delivery that is the central warehouse and that the transportation costs to the agreed place of delivery were borne by the supplier. By acting so under the agreement concerned Kaufland actually charged a fee for delivery of an agricultural or food product outside the agreed place of delivery, charged a fee for storage and handling after the agricultural or food product has been delivered and charged a fee for services that have not been provided to the supplier, all infringements under the UTPs Act that constitute an unfair trading practice. Namely, all the costs that Kaufland should have borne after the delivery of the products to the central warehouse, such as the costs for transport to any particular points of sale and the costs for handling the products after the delivery, had been transferred to the supplier.

The established infringements lasted from 1 April 2018 to 30 May 2019. All above-mentioned infringements that lasted for more than a year constitute serious infringements of the UTPs Act for which sanctions can be imposed on legal persons in the amount of up to 3.5 million Kuna.

Taking into account the gravity, the scope and the duration and the consequences of the infringement concerned for the supplier, as well as a number of extenuating circumstances, Kaufland was imposed a fine in the amount of 1.1 million Kuna. In the view of the CCA the fine will have a deterrent effect not only on Kaufland but also on other re-sellers, buyers or processors in the food supply chain.

The CCA prohibited Kaufland any further above described practices and ordered Kaufland to provide the CCA with evidence on bringing into compliance of the provisions of the agreement now in effect with the relevant provisions of the UTPs Act within an appropriate time frame. This particularly with respect to the clear and unambiguous definition of the duration of the agreement and deleting the existing provision on rebate for the delivery to the central warehouse.

The integral text of the CCA non-confidential decision is available here