On 28 March 2019, the Slovak Parliament overrode the President’s veto and reapproved the new Act on Inappropriate Conditions in Trade in Foodstuffs, which repeals and replaces Act No. 362/2012 on Inappropriate Conditions in Trade Relations Involving Foodstuffs, defining anew what is and what is not considered an inappropriate condition in trade in foodstuffs.
In contrast to previous legislation, Act No. 91/2019 prohibits inappropriate conditions not only in the form of an agreement, but also in the form of requesting or applying an inappropriate condition. According to the new Act, inappropriate conditions are deemed to include, inter alia, financial and in-kind performance in return for a supplier being included in a register kept by a customer (so-called listing fees), changes to this register, a foodstuff being included in a customer’s records and changes to these records, as well as financial and in-kind performance in return for collecting and processing data on parties to a trade relationship. The Act also considers it to be an inappropriate condition should a foodstuff be purchased by a customer at a purchase price that is lower than the economically justified costs of a supplier, in addition to several contractual fines to be imposed on a party to a contractual relationship for breaching the same contractual obligation.
In addition, the Act prohibits practices consisting of penalising a supplier for termination of supply of a foodstuff if the supplier and the customer do not reach an agreement on the purchase price. If the customer and the supplier do not agree on a new purchase price within two months of the date of delivery of a written proposal to the customer, the Act provides that the supplier is entitled to suspend or terminate the supply without running the risk of a contractual penalty.
The Act also responds to frequent practices in trade relations involving foodstuffs, where a customer’s receivables, for example, with respect to a contractual penalty, are unilaterally offset against a supplier’s receivables related to the payment of a purchase price without the statutory conditions for offsetting being met. The so-called fabrication of a fictitious receivable by a customer and its subsequent offsetting is based on the assumption that a supplier does not have adequate personnel and capital and/or on the assumption that a supplier will not pursue its rights in court. In connection with these practices, the Act therefore prohibits unlawful or unfounded offsetting of receivables of parties to a trade relationship.
It also happens in practice that customers demand financial or in-kind performance in cases unrelated to the subject-matter of an agreement, requesting, for example, financial contributions to company events or customer anniversaries. Consequently, the new Act provides that financial or in-kind performance unrelated to the subject-matter of an agreement shall be considered an inappropriate condition.
In addition to the newly-defined inappropriate conditions, the Act also provides for a separate inspection process to inspect inappropriate conditions, introduces the possibility of carrying out an inspection on the basis of an anonymous tip, enables inspectors to summon employees of an entity subject to inspection and seal the premises or data recorded on storage media of the entity subject to inspection. Furthermore, the Act also introduces the obligation for any natural person or legal entity to provide cooperation to inspectors to the same extent as required by the Act from the entity subject to inspection.
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This legal summary has been prepared exclusively for the purpose of providing general information and should not be viewed as legal advice. The aforementioned overview is not comprehensive, but only provides a brief summary of the relevant legislative changes. If you are interested in more detailed information on the aforementioned legislative amendment, please do not hesitate to contact any of your contact persons at Čechová & Partners.