Last year, we informed you about the proposed amendments to the currently valid Act on Prohibition of Unfair Trade Practices in the Food Supply Chain ("ZNTP") – see BMWC Legal Alert 

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After the public consultation procedure was completed and the legislative process was carried out, on 1 March 2024, the Decision on Promulgation of the Act on Amendments to the ZNTP was adopted. Since that Act enters into force on 14 March 2024, we bring you an overview of the most important amendments to the ZNTP.

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Significant bargaining power

The most important amendment of the ZNTP brings a - long-awaited - change to the definition of the buyer's significant bargaining power. Since the assessment of the buyer's bargaining power is actually the key to the application of ZNTP (if the buyer does not have significant bargaining power -> ZNTP does not apply), we dare to say that the new definition is a significant change for the better.

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So, the new definition of significant bargaining power reads:

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It is considered that significant negotiating power in the sense of this Act has a buyer who has achieved a total annual income of at least 2,000,000.00 euros and who is financially stronger than the supplier, unless the buyer proves that the supplier is a contractual party with a stronger income than the buyer.

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Since ZNTP has the task of implementing the goals set by Directive (EU) 2019/633 ("Directive"), this is another step in that direction. The directive observes significant bargaining power through a specific contractual relationship, that is, the buyer’s turnover is placed in a relationship with the supplier's turnover. Such a comparison of the contractual parties provides an insight into the real picture of the negotiating power of each of the participants.

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With this long-awaited change, buyers have been put in a much more favourable position, because from now on, when determining significant bargaining power, the turnover of the supplier, not only the buyer, will be taken into account. In practice so far, it has been shown that in quite a few cases, the suppliers are the ones who, if we look at the turnover, have a significantly greater bargaining power than the buyer, who was thus put in a disadvantageous position.

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Final selling price

"Final selling price " was removed - the term by which the purchase price of an agricultural and food product was multiplied by a coefficient of 1.10.

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Let us remind you that the provision on the final selling price sets the framework for the formation of the (retail) price so that the purchase price of the agricultural and food product is multiplied by at least a coefficient of 1.10, which prevents the buyer's right to free price determination.

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With the removal of that provision, the provisions on unfair practices, which described the determination of retail prices using a formula that took into account the final selling price, also ceased to apply.

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Due to extraordinary circumstances such as the rise in energy prices, the war in Ukraine and the COVID-19 virus pandemic, this provision was not implemented. It was necessary to harmonize this legal provision in order to avoid negative business effects on the economy in the form of price increases.

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Order cancellation deadline

By amending the provision concerning other (always) unfair business practices of the buyer, it was defined that in case of cancellation of an order of perishable agricultural and food products, the 30-day notice is always considered a short notice, because it cannot be expected that in such a short period the supplier will find another the way of placing these products on the market.

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Unlike the previous provision, according to which it was determined that within a notice of less than 30 days it is not reasonable to expect that the supplier will find another way to market or use specific products, now, it seems, it will be judged on a case-by-case basis whether a notice is so short that it is not reasonable to expect the supplier to perform a specific action, (with the exception of course of a notice shorter than 30 days - it will automatically be treated as a short notice, regardless of the circumstances of the case).

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Other always unfair trade practices of the buyer

With the so-called "listing fee", it is no longer prohibited to charge a fee for including a supplier's agricultural or food product in the buyer’s offer, but now it is prohibited to charge a fee for placing on the market agricultural and food products, perishable agricultural and food products, i.e. production and market sensitive agricultural and food products.

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The case when the buyer demands from the supplier the contracting of fictive services or procedures that will not be carried out and for which there is no countermeasure, is now separated into a separate example of unfair trade practice.

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It is still prohibited to charge a fee for storage and manipulation after delivery of an agricultural or food product, but now it is also prohibited to charge a third party for storage and manipulation after delivery.

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When it comes to the sale of an agricultural or food product in retail, selling below the purchase price (that is, the production price if we are talking about products of the buyer’s brand) is also an unfair trade practice, unless the products are about to expire, are being withdrawn from the assortment and are on a complete sale due to the permanent or temporary closure of the sales facility.

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Other, possibly permitted trade practices of the buyer

Article 12 of the ZNTP, which normally defines practices that are prohibited in principle but may be allowed under certain conditions, introduces an important addition for the assessment of payments determined for these services: payments must be based on objective and reasonable, predetermined criteria (before we talked about objective and reasonable assessments). Practice will further show whether the new wording will make it easier to define payments.

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In relation to the service of placing products on the shelves, it has now been expanded so that, in addition to special positions (under permitted conditions), storage and/or inclusion in the offer of agricultural and food products and/or retail display can also be contracted. 

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Finally, in the case of the supplier's participation in the cost of discounts on products / promotions, it is now easier for buyers to the extent that part of the provision on the delivery of data on unsold quantities that were notified to the supplier in advance for "entry at a reduced price" has been removed.

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Harmonization with the euro

Considering that in the Republic of Croatia from 1 January 2023 the euro was introduced as the official currency, it was necessary to make changes in the ZNTP in the form of conversion of monetary amounts.

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Thus, the amount of HRK 15 million of turnover that the buyer must have in order to be considered to have significant bargaining power has now been converted into the amount of EUR 2 million.

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Likewise, the fines determined in case of violation of the provisions of the ZNTP are determined in euros, which is why "a fine of up to 663,610.00 euros for a legal entity, or up to a maximum of 331,800.00 euros for a natural person, will be punished for a severe violation of this Act, a legal or natural person which is considered a customer in the sense of this Act, and which sells an agricultural and/or food product in retail at a price lower than the purchase price at which the buyer acquired that product with value added tax". can be fined up to a maximum of 464,520.00 euros, or a natural person up to a maximum of 199,080.00 euros.

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On the other hand, in the case of minor violations of the ZNTP, a fine of up to 132,720.00 euros is prescribed for a legal entity, or up to a maximum of 66,360.00 euros for a natural person.

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Procedural changes

In order to ensure the publicity and transparency of the work of the Croatian Competition Agency ("AZTN"), Article 22 of the ZNTP was amended in such a way that, in addition to decisions, AZTN has the obligation to publish final decisions of administrative courts and the High Administrative Court of the Republic of Croatia on its website.

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In the case of initiation of proceedings against a certain person, AZTN is obliged to submit a notice of the preliminary established factual situation and summons for an oral hearing, which in the previous wording was defined as "the main hearing", which avoids the similarity and possible confusion of terms with court proceedings.

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As a novelty in the determination of fines for violations of the ZNTP, it was introduced that the buyer will be fined if he uses significant bargaining power towards his suppliers by imposing unfair trade practices in such a way as to agree on the possibility of unilateral termination of the contract in unwritten form or without stating valid reasons for termination or contracts the possibility of cancellation of the contract without an adequate notice period or contracts the possibility of unilateral modification of the contract.

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Additional information

If you are interested in more details on the changes to the ZNTP or have specific questions, please feel free to contact us via our email address.