President of UOKiK Tomasz Chróstny has imposed over PLN 723 million fine on the owner of Biedronka stores network. He found that Jeronimo Martins Polska had unfairly earned money at the expense of food suppliers. This is the largest sanction so far for the use of contractual advantage.
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.
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.
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.
More on this topic – https://www.uokik.gov.pl/news.php?news_id=17030
