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COMPETITION COUNCIL FINES NORFA AND RIVONA

24 01 2014

On January 24, the Competition Council (the Council) found that two provisions in the wholesale and purchase agreements signed by UAB Norfos mažmena and UAB Rivona (Norfa and Rivona or the Companies) and food and drinks suppliers had failed to comply with the requirements of the Law on the Prohibition of Unfair Practices of Retailers of the Republic of Lithuania (the Law). The first provision obligated the suppliers to compensate damages suffered by the Companies as a result of unilaterally reduced prices for certain goods whilst the second one dealt with the return of unsold goods. Having established an infringement of the Law, the Council imposed on the Companies a joint fine totalling 90 000 LTL.

Having evaluated the findings of an investigation, the Council determined that Norfa and Rivona are related undertakings and, thus, are considered to be one entity in the sense of the Law. Hence, these two Companies holding a significant market power have established provisions incompatible with the Law in the agreements with food and drinks suppliers.

The Council highlights that the retail company can best evaluate the risk of sales and plan the amounts of ordered food products and drinks accordingly. The Law establishes the scope of risk distribution between a supplier and a retail company with regard to certain circumstances. The Council determined that the Companies had infringed the provisions of the Law by disproportionately transferring to the suppliers the risks and damages related to the resale of goods already purchased by the Companies.

The Council also notes that the Companies’ actions related to the agreements concerning the supply of food products and drinks may have had a negative impact on the suppliers’ potential to plan investments and apply innovations because of reduced income and uncertainty.

When imposing a fine the Council took into account the nature of the infringement, its duration, scope and other significant circumstances. The Council acted pursuant to the principles of objectivity and proportionality.

Note

The purpose of the Law on the Prohibition of Unfair Practices of Retailers of the Republic of Lithuania is to limit the use of market power by retailers with significant market power and ensure the balance of interests between suppliers and retailers with significant market power. Article 3 of this Law prohibits retailers to carry out any actions contrary to fair business practices whereby the operational risk of the retailers is transferred to suppliers or the suppliers are imposed supplementary obligations or which limit the possibilities of suppliers to freely operate in the market and which are expressed as requirements for the supplier. These requirements also include an obligation to accept unsold food products, except for non-perishable packaged food products if they are safe, high-quality and at least 1/3 of time before their expiration date remains or they have no expiration date and there is a prior agreement in relation to their return.

Competition Council Spokesperson