Czech Republic: New, stricter law on market power abuses in food sector

25.02.2016

Czech Republic: The upcoming update of the Czech Act on the Significant Market Power („ASMP“) shall affect the business of large food retail chains in the Czech Republic. Similarly to the old law, the new law prohibits the large retailers from including certain provisions in their contracts with suppliers of food and agricultural products. However, the new law removes the list of prohibited behaviour from the ASMP, giving the authorities a bigger leeway in determining what constitutes such prohibited behaviour. Further, the substantial detriment to competition shall no longer be a pre-condition for a retailer to be found guilty of abusing its significant market power. Also, a retailer can now be fined for one-off breach of the law, whereas under the old law a consistent breach needed to be proved in order to impose sanctions.

The law stirred controversy among the business community. Large retailers claim that the new regulation will cause increase in food prices, thus affecting customers. Further, the retailers claim that the impact of the law will be that they will avoid dealing with Czech suppliers in order to escape the application of the law on the contractual  relationships with suppliers (a claim that might not materialise, as the law supposedly affects contracts with both domestic and foreign suppliers). The law shall come into force on 6 March 2016. The retailers will have three months to facilitate the change of the current contracts containing provisions in breach of the new law.