Publication

On 12 July 2017, the Act on Unfair Use of Contractual Advantage came into effect in Poland. We hope that the great team of UOKIK will successfully apply this new law.

In Lithuania, the Law on the Prohibition of Unfair Practices of Retailers entered into force on 1 April 2010. The purpose of the Law on the Prohibition of Unfair Practices of Retailers is to limit the use of market power exercised by the major retailers (at present such supermarkets as MAXIMA, RIMI, IKI and NORFA) and ensure a balance of interests in relation to food and beverage suppliers.

The Law is applicable to a retailer if:

a) at least 20 shops of the retailer are not less than 400 square meters, and

b) the total revenues are not less than 116 million EUR.

In case a retailer falls into this category, it is treated as a retailer with a substantial market power and shall be prohibited from taking certain actions towards the supplier. The courts have admitted that it is unnecessary to prove that provisions of an agreement between a retailer and supplier have been practically implemented in order to recognize a breach of the law.

Every year the Lithuanian Competition Council publishes extensive monitoring notes that also include some drawbacks concerning the implementation of the law. Two of the most common drawbacks the CC has pointed out are:

a) some prices may slightly increase;

b) retailers with big market power may aim at reducing marketing expenses and concluding supply agreements only with big and well-known brands/companies. The Competition Council claims that this may also support the establishment of the very strong position of some suppliers.

Based on existing research data and several court disputes involving suppliers, we may say that in some cases suppliers have quite a strong position (especially the well-known brands) in relation to retailers. That might have been one of the reasons why the Law on the Prohibition of Unfair Practices of Retailers was amended, providing that the law is not applicable to relations between retailers and suppliers in cases when the turnover of the supplier is more than 40 million EUR. In our opinion this amount should be decreased, bearing in mind the bargaining power of some suppliers.

It should be noted that the Law on Competition in Lithuania establishes that undertakings acting in the retail market should be considered dominant if they occupy 30 percent of the market, instead of 40 percent that are required in relation to other markets. This proves that the regulation is quite rigorous with respect to retailers. The strictness of this provision becomes even more apparent when we consider the specifics of the definition of the geographic market in retail (quite narrow localization of the markets).

Recently, on 27 September 2017, the Supreme Administrative Court of Lithuania passed an interesting decision on a dispute between the CC and a retailer. The court decided not to impose a fine on the retailer bearing in mind that the retailer could have formed a legitimate expectation since over the course of several years the Competition Council was being informed about the content of the typical agreements concluded with the suppliers and did not treat such agreements as illegal. Interestingly, although the fine was annulled, the court still recognized that the supplier breached the law.