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Czech Competition Authority Imposed Fine on Retailer for Abuse of Significant Market Power

Czech Competition Authority Imposed Fine on Retailer for Abuse of Significant Market Power

Czech Republic
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The Czech Competition Authority (CCA) announced in a press release that it had imposed a fine of CZK 32m (approximately EUR 1.2m) on the Czech retail chain HRUŠKA, spol. s.r.o., for an alleged abuse of significant market power. The decision is not final and an appeal has been filed.

According to the press release, the retail chain allegedly violated the Czech Significant Market Power Act (SMPA) by fully transferring all business risks and losses associated with the sale of goods nearing their expiration date to dozens of its suppliers between 2016 and 2019. The retail chain was said to have provided its suppliers with a so-called full-service within which it demanded that the suppliers reduce the price of goods already in stock if the expiration date was near. If these goods were not sold before the expiration date, a corrective invoice was issued to the supplier. As a result, the supplier had to return part of the money for the goods to the retail chain. According to the SMPA, a retail chain commits an offence by negotiating or exercising a right to return purchased food, except for a material breach of contract. Hence, the CCA concluded that the above-described practice falls under this provision.

In addition to the fine imposed, the retail chain was requested to inform its food suppliers in writing of the contents of the CCA's decision within 14 days of the decision becoming final, and remove the full-service provision (under which the party to the proceeding could return goods to the supplier before the expiration date or lower the purchaser's price of the stock nearing the expiration date) from contracts with its food suppliers within six months after the decision becomes final.

The decision is the first SMPA-related decision of the CCA in 2020 after the Czech Constitutional Court decision declaring the 3 % limit on marketing payments set by the SMPA unconstitutional. Nevertheless, the CCA is expected to be active in fighting unfair trade practices in 2021, with an amendment to the SMPA in the pipeline and a new chairman, who has stated his admiration for the practices of the German Competition Authority.

By Claudia Bock, Attorney at Law, Schoenherr

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