CCA fines TOMMY €212,500 for imposing unfair trading practices

The Croatian Competition Agency (CCA) has imposed a fine of €212,500 on TOMMY d.o.o., Split for a serious violation of the Act on the prohibition of unfair trading practices in the business-to-business food supply chain (UTPs Act).

The administrative proceeding was initiated ex officio following a written submission alleging that TOMMY had sold food products to end consumers at a price lower than the purchase price it had paid to its suppliers (including VAT). This constitutes a prohibited unfair trading practice under Article 11 par (1) item (24) in conjunction with Article 4 par (2) item (6) of the UTPs Act.

The UTPs Act explicitly lists all unfair trading practices in the relation between a buyer and a supplier: a violation occurs when a buyer sells an agricultural or food product to the final consumer at a price lower than the purchase price (including VAT). Exceptions to this rule apply only in three cases:

1. Sale of products nearing their expiration date,
2. Clearance of a product from the assortment,
3. Complete liquidation of stock due to store closure.

In this case, the CCA found that none of these exceptions applied. The UTPs does not recognize any additional exceptions, including the sales below the purchase price due to discounts. Therefore, it is outside the scope of the CCA to assess the legitimacy of selling below cost because of discounts, since the law does not allow for this justification.

In the course of the proceeding, the CCA found that on 4 October 2023 TOMMY sold 12 food products to end consumers at a price lower than the purchase price (including VAT), due to a 10% discount applied to already discounted promotional retail prices. This action violated the UTPs Act. The infringement stemmed from a combination of actions: TOMMY created a customer benefit program that offered 10% off the total bill for a specific consumer group, then set promotional prices for certain products, inviting customers to apply the 10% discount even on already discounted items.

The CCA clarified that offering discounts in itself is not a violation—nor is applying discounts to promotional items. However, it is a violation when the combined effect of discounts and promotions results in a final consumer price that is below the purchase price (with VAT) paid to suppliers. That scenario represents an unfair trading practice under the UTPs Act.

Offering discounts to all or specific groups of consumers is not only allowed but encouraged from a consumer benefit perspective. Therefore, the violation in this case did not concern the existence of discounts as such, but the unlawful outcome of the pricing below cost.

The CCA emphasized that such pricing strategies—where promotional pricing combined with discounts leads to below-cost sales—constitute a direct breach of the UTPs Act, which is designed to protect fair trading practices in the food supply chain.

While no direct financial harm was found to end consumers or suppliers in this case, the CCA stressed the broader negative effects of such practices:

• Undermining equality among market participants,
• Creating pressure on suppliers to reduce prices or grant rebates, harming small producers and family farms (cooperatives),
• Distorting competition and destabilizing the market,
• Misleading consumers with unsustainably low prices that can lead to fewer choices and higher prices in the long term,
• Damaging the entire agricultural and food supply chain, as unsustainable pricing undermines production viability and supply security.

The severity of this type of infringement is underscored by the fact that the UTPs Act mandates the severest fines available under the law for such conduct.

Based on Article 11 par (1) item (24) in connection with Article 4 par (2) item (6) of the UTPs Act, the CCA imposed the €212,500 fine on TOMMY, taking into account the severity, scope, duration, and consequences of the violation, taking into account the mitigating circumstances.

The CCA considers the imposed fine to have achieved its purpose of deterrence—not only toward TOMMY but also as a message to all entities subject to the UTPs Act.