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Office of Competition and Consumer Protection

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Contractual advantage - two decisions, the first maximum fine

< previous | next > 07.10.2019

Contractual advantage - two decisions, the first maximum fine
  • The first and the highest fine for unfair use of contractual advantage over farmers.
  • UOKiK imposed a fine amounting to over PLN 8.3 million on T.B. Fruit Polska.
  • Another food-processing plant, Rauch Polska, avoided the fine because it will change its practices.

The Act on Combating the Unfair Use of Contractual Advantage became effective on 12 July 2017. An entrepreneur from the agri-food industry that breaks the law will be fined up to 3% of its turnover. So far, the Office has issued six decisions. In most cases, entrepreneurs voluntarily undertook to quickly give up their unfair practices and improve the situation of their contractors. This is why they avoided fines. UOKiK is, however, involved in another 7 proceedings.

The main purpose of the new regulations and our actions is to quickly improve the situation of weaker parties operating in the agri-food sector, e.g. farmers. Therefore, if an entrepreneur voluntarily wants to change its practice and quickly introduce solutions that will strengthen the position of its smaller contractors, we will not impose a fine. However, when we see that companies are not willing to cooperate and discontinue unfair actions, we have no hesitation in imposing severe fines. This was the T.B. Fruit Polska case. We imposed the first fine for unfair use of the advantage, says Marek Niechciał, President of UOKiK.

Decision – T.B. Fruit Polska

T.B. Fruit Polska is one of the largest fruit buyer and apple concentrate producers in Poland. The company is a member of the European group belonging to Francoso Corporation. It also processes cherries, raspberries, chokeberries, strawberries and blackcurrants. Following the proceedings, UOKiK found that the entrepreneur failed to meet payment deadlines it had set. Despite the fact that the contract provides for 30 days to pay, farmers receive their money much later. On average, T.B. Fruit Polska was over 100 days late with payment, and the longest delay was almost a year.

We hoped during the proceedings that the company would voluntarily change its practice that put farmers in danger of losing their financial liquidity and facing serious financial problems. Unfortunately, it did not happen, even despite a clear message from the Office saying this was law-breaking. Hence the highest fine and an order to discontinue the practice, says Marek Niechciał, President of UOKiK.

The Office imposed a fine of PLN 8.3 million on T.B. Fruit Polska, i.e. 3% of the company’s last year’s turnover, which is the highest fine for unfair use of contractual advantage. The decision is not final and may be appealed against to the court.

Decision – Rauch Polska

The second decision concerns Rauch Polska. The company is a part of Rauch Fruchtsafte group, one of the largest European fruit juice producers. The proceedings showed that the entrepreneur could have unclearly set the price at which it bought fruit from suppliers. It only provided vague information that the price would depend on the quality of agricultural products, delivery date or market conditions, such as supply and demand. As a result, the company’s contractor could not even imprecisely estimate an amount it would receive for the products delivered.

The second practice that could constitute the use of contractual advantage over farmers is involves late payments. The Office found that a difference between contractual payment deadline and the actual deadline was up to approx. 40 days.

During the proceedings, Rauch Polska cooperated with UOKiK and undertook to change the practices in question. UOKiK decided that actions the company promised to take would improve the situation of farmers, therefore it accepted the company’s proposal.

Remedial measures

In new contracts, Rauch Polska will set minimum prices for the purchase of fruit and fixed prices for vegetable. The company will pay farmers immediately, no later than within 14 days.

In the absence of price arrangements, the supplier will be able to sell previously contracted products to another entity without adverse contractual consequences. In addition, farmers will be able to request a re-examination of the quality of fruit delivered. According to the agreement, if the products are in poor condition, their price may be reduced. The cost of fruit quality examination will be borne by the party to whom its result will be unfavourable.

The company also promised to increase purchase volume directly from farmers by a minimum of 6% by 2022. This will improve the position of farmers and will help negotiate better prices in the future.

The company will also audit all contracts concluded from 12 July 2017 to the decision issuance. If it turns out that it has not paid or has got behind with its payments, then the company will pay the amount due and statutory interest for late payment. Rauch Polska will also give free trainings that will help contractors correctly provide documents necessary to receive their money. This will also shorten the time farmers wait for money. Furthermore, the company will have to submit a report to UOKiK on the performance of obligations.

The example of two food-processing plants show a completely different attitude, not only towards the Office, but above all to their own contractors. Rauch Polska has voluntarily changed its practices to the benefit of its trading partners. T. B. Fruit did not intend to stop abusing farmers, hence a multi-million fine imposed on this company. I think this situation clearly shows that cooperation with UOKiK pays off much more than persistent violation of the law, says president Marek Niechciał.

First effects of UOKiK’s summons

In addition to decisions, the Office also issued summons to 14 other food-processing plants that might have used contractual advantage over farmers, for instance in the form of too long payment periods, failure to meet payment deadlines or unclear methods of setting the price. In most cases, entrepreneurs responded positively to the Office’s summons, namely they introduced changes to contracts, shortened payment deadlines or undertook to pay off arrears. Following UOKiK’s intervention, ZAK, Materne and Jabłko Siedleckie have already paid fruit suppliers all or part of their amounts due. Gomar Pińczów, ZPO Sambor and MaxFrut promised to settle their bills within the agreed timeframe.

In total, fruit suppliers will receive over PLN 2.5 million of overdue payments and default interest from entrepreneurs who cooperated with UOKiK. As for entities that will not pay their amounts due, UOKiK will institute explanatory proceedings.

The Act on Combating the Unfair Use of Contractual Advantage has been in force for over 2 years. Entrepreneurs are well aware of what is allowed and what is illegal. Therefore, they must know we will no longer tolerate practices detrimental to the interests of weaker contractors, including Polish farmers, says President Marek Niechciał.

The cases of contractual advantage are handled by the UOKiK Branch Office in Bydgoszcz. You can report your problem anonymously:

  • by e-mail at the following address: [SCODE]cHJ6ZXdhZ2FAdW9raWsuZ292LnBs[ECODE],
  • in writing to the UOKiK Branch Office in Bydgoszcz, Plac Kościeleckich 3, 85-033 Bydgoszcz, or
  • by phone at the following number: 52 345 56 44

Additional information for the media:

UOKiK Press Office
Pl. Powstańców Warszawy 1, 00-950 Warszawa, Poland
Phone +48 695 902 088, +48 22 55 60 246
E-mail: [SCODE]Yml1cm9wcmFzb3dlQHVva2lrLmdvdi5wbA==[ECODE]
Twitter: @UOKiKgovPL

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