The Law on Trading Practices for Certain Types of Products was recently adopted, covering food products and products of particular importance for market supply (such as personal hygiene products, household chemicals, etc.), with the final list of products to be determined by a Government decree. According to the explanatory memorandum, the primary reason for enacting this law is the protection of small producers in their relationship with retail chains, distributors and processors.
This law represents a brand-new regulation in our legal system. But what exactly is changing in the relationship between suppliers and buyers (retailers, distributors and processors), and why could this law, if consistently applied, significantly alter market dynamics, primarily in the food sector?
- The End of Informal Agreements
One of the key changes is the introduction of strict formality. According to the law, contracts must be concluded in written form no later than March 31st of the current year. In other words, all existing informal agreements between producers on one side and retailers and distributors on the other must be formalized in writing by March 31, 2027.
The law explicitly prohibits vague or conditional clauses that grant discretionary rights to one party (usually the stronger buyer) to retroactively determine financial obligations. To ensure maximum precision and transparency, contracts must include a specific overview of financial elements (price, benefits, fees, penalties, costs, etc.).
- Who is “Big” and Who is “Small”? (Significant Bargaining Power)
The law introduces the concept of significant bargaining power, based on annual revenue ratios. For example, if a supplier’s or producer’s revenue is up to €2 million, while the buyer (retail chain or distributor) generates revenue exceeding that amount, the buyer is considered the party with significant bargaining power. This classification is crucial because the law is specifically designed to protect the weaker party in such asymmetrical relationships.
- “Black” and “Grey” Lists: What is Absolutely Prohibited?
The law clearly categorizes unfair practices into two groups:
- Black List (Absolutely Prohibited): These practices are forbidden regardless of any agreement. These include:
-
- Agreeing on payment terms longer than 30 days for perishable goods.
- Cancelling orders for perishable goods less than 30 days before delivery.
- Unilateral changes to contract terms (price, quantity, quality).
- Charging costs unrelated to the sale of goods (e.g., demanding funds for the renovation of the retailer’s stores).
- Grey List (Conditionally Prohibited): These practices are allowed only if clearly agreed upon in advance and based on actual costs. Examples include fees for “listing” new products, marketing, promotions, or special product placement in stores and etc.
- Protection Against Retaliation
One of the most significant innovations is the prohibition of commercial retaliation. Suppliers and producers often fear being “de-listed” (removed from shelves) if they complain about poor treatment. The new law explicitly forbids threats of reducing orders or removing products from the assortment simply because a supplier exercised their legal rights.
- Who Oversees Implementation?
Supervision of this law is entrusted to the Commission for Protection of Competition. The Commission holds significant powers, including conducting proceedings, issuing compliance measures, imposing monetary sanctions, and ordering interim measures to halt harmful practices. Interestingly, the law also introduces a “whistleblower” system (collaborators in the proceedings) who provide key evidence of violations and are entitled to a financial reward.
Conclusion: An End to the Problems?
The law is modeled after EU directives (going even further than European practice in some aspects) and aims to mitigate imbalances and reduce the uncertainty and costs that have historically been borne by small producers.
It remains to be seen whether the law will be effectively applied and bring genuine benefits to producers in their business relations with retail chains. The question is whether regulation alone is sufficient to overcome structural factors (market concentration and market power), and whether stricter regulation might lead to lower demand for domestic products from small producers. Furthermore, practice will show if legal or factual mechanisms will be found to bypass the law, whether suppliers will report irregularities, and if the Commission will be efficient in resolving unfair trading practices.
In any case, the law has set a “homework task” for all entities involved: to review and adjust their trading practices, contract templates, price lists, general terms, and supporting documentation within the next four months of the compliance period.
This text is written for informational purposes only and does not constitute legal advice. We are at your disposal for any additional information.
