The Office of Competition and Consumer Protection announced on Wednesday that Eurocash has been fined 76 million PLN for the unfair use of a contractual advantage. The decision concerns the company’s relationship with suppliers of agricultural and food products for its stores. Eurocash does not agree with the office’s decision.
As reported, the actions taken showed that Eurocash collected from the suppliers of agricultural and food products a number of additional and unjustified fees. It was noted that the main activity of Eurocash is the wholesale and retail sale of food and daily products.
The entrepreneur, also through subsidiaries, is the owner of the largest chain of wholesalers in Poland and the organizer of several retail chains, including: ABC, Delikatesy Centrum, Lewiatan, Gama, Groszek and Euro Sklep. The decision issued is related to the company’s relationship with the suppliers of agricultural and food products to these stores – this has been clarified.
The charges against Eurocash
– Some of the services paid by the contractors were not performed at all, and the company should provide some services under the signed contract without additional remuneration. In addition, the service providers did not receive information on the costs and results of some services. The aim of this type of measure by Eurocash was to reduce wages for entities that deliver agricultural and food products to stores – Thomas Crostiny, president of UOKiK, said in the press release.
He added that the value of the undue benefit obtained by Eurocash in the course of the proceedings as a result of questionable practices towards entities in which the company had a contract advantage amounted to more than 43 million PLN in 2018-2020.
According to UOKiK, Eurocash did not offer contractors to keep their products in trade show, despite charging a fee for them. The information obtained during the procedure shows that the parties that paid the fees for this service were treated in the same way as those that did not pay them. Suppliers also paid for enabling, organizing and supervising promotions in trade network stores. At the same time, some of them incurred other fees and gave discounts for organizing promotions in Eurocash stores, for example 14.5%. Monthly fee for individual promotional services or for participation in the newsletter.
The fee charged by Eurocash also included the possibility for a supplier to sponsor trade network integration meetings, but a contractor wishing to do so had to in fact incur additional costs. The fee did not guarantee that you could promote yourself (eg tasting products) during these meetings.
The head of UOKiK also questioned the fees for training store employees regarding techniques for selling the supplier’s merchandise. In the Bureau’s view, these were in fact general training courses on selling different product categories (eg meat, deli, fruits and vegetables), and not the set of specific suppliers that paid for them. It was the same with the tuition fee and informing franchisees of news from the suppliers’ offer. The office said that the entrepreneurs asked by the Bureau of Competition and Consumer Protection did not know anything about providing such services, did not provide information about new products to Eurocash, and indicated that the company ordered the products and distributed them at its own discretion.
UOKiK President about Eurocash: Such actions are unacceptable
Moreover, some activities paid for by Eurocash will be carried out anyway due to the economic interest of this entrepreneur. It was so with observing market demand and sales trends for the supplier’s products. Eurocash conducted such activities for all products available in stores, and not only for those whose suppliers paid for them. It was the same with the supervision fee for orders by stores listed in a particular merchant network.
The analysis of the evidence leaves no doubt that the purpose of many of the fees charged by Eurocash was not to provide reliable services, but to reduce the remuneration owed to suppliers of agricultural and food products. The company’s counterparties did not know how the services they were paying for would be performed, or whether or not they would be offered at all. Crostiny said such actions are unacceptable and constitute an unfair use of contractual advantage.
The decision issued is not final and can be appealed to the Competition and Consumer Court.
There will be an appeal
Eurocash does not fully agree with the decision of the office and intends to exercise its right of appeal to the Competition and Consumer Court.
“The court will decide whether to cancel, uphold or change the office’s decision. The final amount of the fine and the date of payment will be determined after the completion of the appeal procedures and the issuance of the final judgment in the above-mentioned case,” the company said in its announcement.
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