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Office of Competition and Consumer Protection

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Superior bargaining power - proceedings of the President of UOKiK against PolishAgri

< previous | next > 25.03.2021

Superior bargaining power - proceedings of the President of UOKiK against PolishAgri
  • President of UOKiK Tomasz Chróstny brought charges against PolishAgri, a company that buys and sells grain and rapeseed.
  • The company may be unfairly abusing its superior bargaining power against suppliers.
  • The Office will also examine the practices of other companies buying grain and rapeseed.

PolishAgri purchases wholesale of various types of grain including wheat, rye, triticale, malting barley and rapeseed - mainly for export. It is a leading exporter in western Poland. Each year, it sells approx. 100,000 tons of grain and rapeseed to customers, including Germany, the Netherlands and Scandinavian countries. The company cooperates with several hundred suppliers of agri-food products, which are generally individual farmers, operating their farms on a small scale. The parties operate under a pre-drafted model contract, and an individual supplier has no influence over its content. The Office's findings so far indicate that the terms of this contract may be detrimental to the suppliers, by requiring deliveries also in the event of circumstances beyond the farmer's control that prevent performance of the contract. President of UOKiK Tomasz Chróstny charged PolishAgri with unfair use of superior bargaining power.

Agricultural activity is particularly dependent on weather conditions. Drought, excessive rainfall or flooding can cause crop losses that cannot be either predicted or prevented. In their contracts with PolishAgri, farmers commit to deliver a certain quantity and quality of agricultural products. Contracts are usually concluded during or immediately before the production process. From the evidence gathered, it appears that the company is placing undue risk on the farmers to fulfill the contract. It requests that farms deliver their contracted supplies despite circumstances beyond their control, particularly force majeure, preventing the delivery of the agreed quantities of grain or rapeseed. These circumstances can be climatic conditions, natural forces or disasters. When suppliers are unable to sell the contracted products from their own farm, they are required to purchase them "on the open market" or bear the cost of a substitute purchase made by PolishAgri. The Company then provides for severe penalties for failure to perform the contract.

“Under the principles of good practice in the food supply chain, it is necessary to take into account the risks borne by farmers. The liability mechanism applied by the company may be particularly severe for those farms that only supply products from their own operations. I brought the charges against PolishAgri, pointing out that it is an unfair practice to require farmers to deliver their contracted commodity in the event of circumstances beyond their control that would prevent delivery, such as drought. We also consider it an abuse of superior bargaining power to require farmers to purchase products on their own behalf in order to fulfill their contract with the company in such situations. And all this under the threat of high financial penalties,” the President of UOKiK, Tomasz Chróstny, explains.

On the basis of the evidence gathered in the course of the investigation, it appears that contractual terms unfavorable to suppliers were implemented by the company in practice. It follows from reports received by the Office that farmers who have approached PolishAgri with documentation proving their losses following weather phenomena have been denied a fair settlement of the contract. As stated by independent provincial commissions – on a case-by-case basis, these losses amounted to up to 70% of the average annual agricultural production.

For the unfair use of contractual advantage, the company may be fined by up to 3% of its annual turnover.

Entrepreneur, farmer, if you operate in the agri-food industry and your major counterparty abuses its competitive advantage by imposing unfavorable conditions of cooperation – report it to UOKiK. We have launched a special form to assist you in reporting irregularities.

You can fill it out here: https://ankieta.uokik.gov.pl/formularz-zgloszenie-przewaga/

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

Attached files

 

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