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Office of Competition and Consumer Protection

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Problems faced by farmers - the latest actions of UOKiK

< previous | next > 12.07.2018

Problems faced by farmers - the latest actions of UOKiK
  • UOKiK, Ministry of Agriculture and KOWR are checking if the soft fruit prices may have been set in an unlawful way.
  • These are not our only actions on the agri-food market. We have also initiated proceedings against Südzucker. The company may have used its contractual advantage against farmers.

A year ago, on 12 July 2017, the Act on Counteracting the Unfair Use of Contractual Advantage entered into force. UOKiK was granted the right to defend smaller entities in the agri-food sector against contractors of a much larger economic potential. So far, the Authority has intervened in 36 cases (20 proceedings and 16 calls to entrepreneurs). In March 2018, it also issued the first decision - concerning the supply of carrots - and published a report with recommendations for fair contracts in the dairy industry.

Proceedings against Südzucker

The latest UOKiK’s action under the Act on Contractual Advantage are proceedings against Südzucker company. It is one of the four sugar producers in Poland, which operates in the south of the country, where other sugar companies do not have their plants. UOKiK received complaints from farmers, who pointed out the irregularities in the contracts used by the company. The Authority has initiated proceedings regarding the Südzucker relationships with eight randomly chosen growers who, in recent years, delivered beets worth more than PLN 50,000. Importantly, the situation of other farmers is the same as the chosen eight, because the contracts are based on a standard template.

- Our analysis of contracts showed that the undertaking may use its bargaining power against sugar beet suppliers. The Authority's doubts were raised by unclear rules of setting the price and too long payment terms – says president Marek Niechciał.

In the first case, farmers know only the part of the rate they will receive - the so-called guaranteed price - the other part is determined on imprecise terms - it depends primarily on the future sugar sale price. Therefore, the growers have no chance to know the final price. In addition, they cannot verify the reliability of calculations made by Südzucker.

UOKiK also questioned the payment terms applied by the company. According to the law, it should not exceed 60 days. The sugar producer provided two payment terms. Farmers who deliver the product by 30 November receive a guaranteed price by 10 December. This is disadvantageous for growers who deliver beets earlier, e.g. as part of early deliveries in mid-September. Farmers who deliver vegetables after 1 December are even worse off. The contract provides that they will receive the payment when the sugar campaign is finished, that is, after beets have been processed into sugar. There is no specific date given, which may mean the supplier does not even know the approximate date at which he will receive the money.

For abusing of contractual advantage, UOKiK may impose a fine in the amount of up to 3 percent of the turnover achieved by the undertaking in the preceding year. The proceedings may also be completed without any fine being imposed. The Authority may refrain from imposing a fine if the undertaking voluntarily undertakes to cease the unfair practices or to remedy the consequences thereof.

Soft fruit - inspections

Another UOKiK’s action in the area of contractual advantage is inspection at the premises of undertakings processing soft fruit, including strawberries, raspberries, cherries, and currants. In recent weeks, the media has been loud about the low purchase prices of these products. Also, UOKiK received complaints from farmers on this issue. Therefore, the Authority, together with the National Center for Agricultural Support (KOWR), is examining the situation.

- We are checking whether the contractual advantage against small fruit suppliers may have been used to set soft fruit prices. We have initiated an explanatory proceedings and inspected the premises of six large processors - says the president of UOKiK, Marek Niechciał.

Since June 2018, the UOKiK’s employees have been examining fruit supply contracts along with the payment terms and a list of suppliers. Also, the heads of inspected companies and persons responsible for cooperation with farmers have submitted explanations.

 - At the moment, we are analysing the materials collected during the inspection. Regardless of the results, we can say today that one of the problems is the low bargaining power of farmers who grow fruit. Therefore, it is necessary that they join larger producer groups. In this way, they will be able to negotiate more effectively with large purchasers, e.g. to obtain better prices - says the president of UOKiK, Marek Niechciał.

Simultaneous inspections were also carried out by the National Center for Agricultural Support. KOWR examined compliance with the obligation to conclude supply contracts with farmers provided by the Act on the Organization of Certain Agricultural Markets and the EU Regulation 1308/2013.

Contractual advantage - current actions of UOKiK

- Currently, we are dealing with 10 cases on the contractual advantage. They pertain to the market for purchasing potatoes and cabbage, payment terms for apple deliveries, etc. We are also examining the issue of charges imposed on suppliers by retail chains for using the purchase platform - says Piotr Adamczewski, director of the UOKiK Branch Office in Bydgoszcz.

Contractual advantage occurs in cases where there is a significant disparity in economic potential between the recipient and the purchaser and where the weaker of these parties lacks the sufficient capacity for selling or purchasing agricultural or food products from other undertakings. All cases involving contractual advantage are being examined by the UOKiK Branch Office in Bydgoszcz.

Additional information for the media:

UOKiK Press Office
pl. Powstańców Warszawy 1, 00-950 Warszawa
Phone: +48 22 55 60 430
E-mail: [SCODE]Yml1cm9wcmFzb3dlQHVva2lrLmdvdi5wbA==[ECODE]

Twitter: @UOKiKgovPL

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