• Inspections at 77 purchasing centres and processing plants, further proceedings against large entities postponing payments to farmers.
• Changes in the law enabling assistance to small food producers.
• Details in the report, in which the UOKiK analyses the difficult situation on the fruit market in this year and presents the proposal how to avoid its repetition in 2019.

The agricultural market is under continuous surveillance by the Office of Competition and Consumer Protection. Thanks to the Act on the Unfair Use of Contractual Advantage which came into force in July 2017, UOKiK can protect smaller agri-food market players against unfair practices of large companies.

“We use new legal tools to protect Polish farmers. As early as before the first fruit harvest in this year, we started to investigate the trade relationships between the producers, the purchasing centres and large processors. The result was our report, as well as the proceedings initiated against large fruit processors. However, it was not the end of our actions. Today, the amendments to the Act on the Unfair Use of Contractual Advantage came into force, among other things in order to enable dealing with a larger number of cases and to provide protection to small food producers,” says Marek Niechciał, the President of UOKiK.

Inspections at processing plants and purchasing centres

The inspections of the entrepreneurs started in June 2018, i.e. before the harvest time. Initially, the Office inspected large fruit processors i.a. examining their fruit supply contracts, respective payment dates and the lists of suppliers. At the next stage, the provincial inspectorates of the Trade Inspection Authority carried out the inspections of soft fruit and apple purchasing centres at the request of the Office. They checked, among other things, the contracts concluded by the purchasing centres both with farmers and the plants refrigerating and processing fruit. Among other things, the inspectors examined the commercial relationships between the entities. UOKiK and the Trade Inspection Authority inspectors visited in total 77 sites (processing plants and purchasing centres). The conclusions of the inspections are presented by the Office in its report.

Payment backlogs

The main problem that came to the attention of UOKiK inspectors and simultaneously the most frequent demonstration of the unfair use of contractual advantage were the delays in payments. According to the Act on Payment Dates in Commercial Transactions, parties may stipulate payment date longer than 30 days, but not exceeding 60 days. However, most frequently, the payment date was 90 days, and it happened not to be respected.

“Payment backlogs are one of the serious problems of the Polish economy. Unfortunately, our inspections show that they are common also in the agriculture. We also noticed the effect of such delays being transferred to ever lower trading levels. There were cases where a purchasing centre owner received payment after the elapse of 90 days and made payments to suppliers with an identical delay. Therefore, I appeal to all the participants of the agri-food market to observe the statutory payment dates. I can also announce that we will look carefully whether the law is respected in that matter,” says Marek Niechciał, the President of UOKiK.

Proceedings against fruit processors - Real and Rauch Polska

Recently, the Office accused large processors - Real of Siedlce and Rauch Polska of Przeworsk - of using excessively long payment dates and delays in payments.

Real is one of the largest fruit purchasers and frozen food and fruit concentrate manufacturers in Poland. According to the findings of the Office, the company applied even six-month long payment dates with largest delays in payment reaching over 170 days.

The second proceeding is conducted against Rauch Polska. The company belongs to Rauch Fruchtsafte. one of the largest fruit juice manufacturers in Europe. The Office accuses the company of delays in payments up to 119 days, and use of unclear price establishment methods. The entrepreneur provided only imprecise information that price will depend on, i.a., the quality of agricultural products, the delivery date and such market conditions as the sizes of the demand and the supply. According to UOKiK, it makes it impossible for a supplier to determine even the approximate amount that will be received for delivered fruit.

The unfair use of contractual advantage by entrepreneurs is subject to a fine in the amount of 3 percent of the turnover generated in the previous year.

Additionally, the Office is currently conducting two proceedings against fruit processors - against T.B. Fruit Polska and Döhler.

The reasons of this year’s situation

Apart from the illegal activities, UOKiK also diagnosed a number of problems that caused the difficult situation of the fruit growers in this year.

They include:

• The overproduction of fruit in 2018. This year’s weather conditions resulted in much more abundant harvest that in the previous years. The market was flooded with amount of fruit much exceeding the demand. It became the reason of the decrease of prices.
• Weakness of farmers in negotiations. A single entity is unable to obtain such
  a good price as a group of producers can. Therefore, it is important for farmers to join associations, which will conduct the negotiations with stronger fruit processors on their behalf in the next years.
• Production of fruit mainly with the retail market in mind. Most farmers would like to produce dessert fruit, i.e. top quality fruit intended for the retail market. To do so, they incur higher costs of growing or harvesting. However, only a small amount of apples, strawberries or raspberries finally meets the requirements for dessert fruit. If farmers from the very beginning focused in part or even fully on industrial production, the incurred costs would be much lower.
• Too small number of contracts for specified quotas. Under such contract,
  a farmer undertakes to produce and supply a specified amount of products, and the buyer must collect them for pre-established price at a specified time. The lack of such contracts results in the situation that the prices achieved by farmers depend first of all on the market conditions at the moment of sale, which is particularly unfavourable in case of overproduction of fruit.

Amendments to the Act on the Unfair Use of Contractual Advantage

The situation on the agri-food market will also be improved by the amendments to the Act on the Unfair Use of Contractual Advantage, which come into force today. An important change is the adoption of a new definition of contractual advantage. From now on, it will be enough for the Office to intervene if there is a disproportion in the economic potential between the parties to a contract. Simultaneously, the second condition, according to which the weaker trading partner must have no possibility to supply its products elsewhere, has been removed.  This will allow to increase the number of cases handled by the Office. The abandonment of the trading thresholds has the same purpose. Earlier, the Office could only intervene when the turnover between the supplier and the buyer in one of the recent years exceeded PLN 50,000, and the turnover of the stronger party or its capital group amounted to at least PLN 100 million in the preceding year. Now, UOKiK may intervene in every case of unfair use of contractual advantage. This will also allow to protect small and medium-size entities, including farmers. Moreover, the changes also give everyone an opportunity to report the unfair use of contractual advantage and ensure the anonymity of such reporting party. Another important change is the simplification of the procedure of making a decision immediately enforceable, which means ordering of immediate discontinuation of a practice that is detrimental to the weaker party to the contract, such as a farmer. 

Additional information for the media:
UOKiK Press Office
pl. Powstańców Warszawy 1, 00-950 Warsaw
Phone: 695 902 088, 22 55 60 430
Email: biuroprasowe@uokik.gov.pl
Twitter: @UOKiKgovPL