Poland: retailer Biedronka fined for unfair practices
The Office of Competition and Consumer Protection in Poland (UOKiK) imposed a fine of 723 mln PLN (€ 163 mln) on the owner of the Biedronka retail chain. The company Jeronimo Martins Polska unfairly earned at the expense of suppliers of food products. This is the biggest sanction for abusing of superior bargaining power imposed to date.
Press release UOKiK
Commercial networks get various commercial discounts from their suppliers so as to purchase products at as favorable prices as possible. Best practices and legal regulations require that the goods purchase price be determined in an agreement binding on its parties. Granting a discount at the time of selling goods to a network or as it has satisfied certain requirements laid down in the agreement (such as, for example, turnover at a certain level) is acceptable. However, unfair discounts comprise the ones that were not granted by the supplier in the agreement but they are demanded by a commercial network as soon as it has become aware of the sales results for a given period. They lead to an unexpected price reduction, drop in earning results and margins as well as they hinder planning of business operations on the supplier’s part.
Arbitrarily discounts mainly concerns fruit & vegetable suppliers
This was the case of Jeronimo Martins Polska - the owner of the Biedronka network. The data collected by the Authority in the course of the proceedings and controls in the offices of this entrepreneurprove that the company was arbitrarily imposing some discounts, mainly for the suppliers of fruit and vegetables.
Counterparties were informed of the necessity to grant a discount as late as at the end of the billing period, after the deliveries have been made. Thus at the time of concluding the agreement they did not know how much they would earn as at any moment the owner of Biedronka could have demanded higher remuneration by virtue of granting an additional discount whose value had been known solely to them. If previous invoices had not been adjusted by this discount, the supplier was threatened with a fine. Due to Biedronka’s market power, suppliers were accepting unfavorable conditions as they feared that termination of the cooperation would result in even bigger financial losses.
Only during the three years audited by the Authority, that is: in 2018, 2019 and 2020 - as a result of the challenged practices - the Jeronimo Martins Polska company earned more than PLN 600 million in cooperation with the food sector. During the period under investigation the prohibited actions affected more than 200 business entities while approximately 80% of the instances pertained to fruit and vegetable supplies. In marginal cases the value of the unfair discount was exceeding 20% of the entire trading value with Biedronka.
"The Jeronimo Martins Polska company was applying an unfair mechanism that consisted in arbitrary reduction of remuneration for its counterparties for the deliveries made. What is essential is that the additional discounts earned from food suppliers were not translated into lower prices of products for the Biedronka’s customers. This is an absolutely unacceptable use of market power by the commercial network. In view of the fact that for many business entities the supplies for Biedronka constitute a significant production volume, they were bearing immense costs. The practices of this type destroy the grounds of fair competition and responsibility for counterparties, they are the reflection of profound unfairness and lack of respect for other entrepreneurs. The fine had to be adequate to the breach of laws, burdensomeness of the practice and level of benefits earned unfairly by the Portuguese network. Within the three years we have audited, Jeronimo Martins Polska, through its practices, deprived its counterparties - mainly fruit and vegetable suppliers - of a few hundreds of millions of zlotys. The sanction can’t have been low for the practices of this type which destroy the foundations of fairness and responsibility in the relationships among entrepreneurs. I have decided to impose a fine of PLN 723 million on Jeronimo Martins Polska" says Tomasz Chróstny, President of UOKiK.
The maximum penalty for the abuse of a superior bargaining power on the agri-food market may amount to 3% of the entrepreneur's annual turnover.
"The decision is very important also for the Biedronka’s suppliers. Firstly, I have ordered to stop the prohibited practices. Secondly, the decision finding the unfairness of the discount system at Jeronimo Martins Polska will facilitate the suppliers affected by those practices to get a compensation in civil proceedings to which I want to encourage as early as now. As the Authority, in every single case of this type we are ready to deliver a material opinion in the case to facilitate Biedronka’s suppliers to get back of their money of which they were deprived. Large commercial networks, in contrast to other sectors, have not been affected by significant restrictions. This is why it is even more important that they behave in a responsible and fair way towards other entrepreneurs" adds Tomasz Chróstny, President of UOKiK.
Full press release: https://www.uokik.gov.pl/news.php?news_id=17030