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THE RETAIL CHAIN LEGISLATION IRRITATING THE EU HAS EVERYONE UPSET FOR A DIFFERENT REASON

A chain reaction;battling for EU law

THE EUROPEAN Commission has once again signalled that Slovakia's retail chains act needs to be promptly brought into harmony with European legislation or else completely erased.
Though it is clear that Slovak legislators will not make the corrections by May 1, when the country enters the EU, the European Commission (EC) is not likely to penalise Slovakia immediately, officials say.
Arhi Palosuo of the EC Directorate General for Enlargement told Deputy Prime Minister Pál Csáky that Brussels was not planning protective measures against any of the 10 new members in response to violations of membership obligations.

THE EUROPEAN Commission has once again signalled that Slovakia's retail chains act needs to be promptly brought into harmony with European legislation or else completely erased.

Though it is clear that Slovak legislators will not make the corrections by May 1, when the country enters the EU, the European Commission (EC) is not likely to penalise Slovakia immediately, officials say.

Arhi Palosuo of the EC Directorate General for Enlargement told Deputy Prime Minister Pál Csáky that Brussels was not planning protective measures against any of the 10 new members in response to violations of membership obligations.

Csáky promised to urge the parliament to hurry up with the remaining pieces of Slovak legislation needed to be in accordance with EU norms, Csáky's spokesman, Martin Urmanič told the press.

"They have given us some time but expect significant progress within the coming six months," Csáky told the TASR news wire on April 21 during his visit to Brussels.

The law on retail chains passed by parliament in June 2002 was originally prepared to prevent large, principally foreign, retail chains from abusing their market power. However, the EC objects that it uses non-market tools to achieve this aim.

According to the EC, Slovakia has violated the principle of the free movement of goods.

Although the law dropped a draft rule that retail chains in the country must carry 70 percent Slovak goods, the EC's main negotiator for Slovakia's entry, Dirk Meganck, said that the requirement that stores carry a "proportional" assortment of domestic products created "uncertainty".

"Producers and suppliers don't know what this term means. This uncertainty will have to be eliminated," Meganck said on July 3 at the last sitting of a joint EU-Slovakia entry committee before Slovakia received the EC decision on its admission to the EU in December 2002.

The Slovak Economy Ministry submitted its draft amendment to the retail chains act on January 27.

"We have discussed the draft amendment with Brussels and made corrections to satisfy the EU legislation," Economy Minister Pavol Rusko told the daily Pravda.

The Slovak Antitrust Office, which basically favours the cancellation of the law, has raised some substantial objections to the draft, claiming that it is not applicable in Slovakia and in fact benefits producers.

"We prepared the law in a way that was advantageous for the Slovak market environment. Unfortunately, the Antitrust Office was holier-than-thou and exceeded the EU demands," said Rusko.

Representatives of the Slovak Chamber of Agriculture and the Food Industry and the Union of Businessmen and Employers in the Food Industry have made scathing remarks about the law, saying it will both increase consumer prices and invite corruption.

The industry experts claim the draft defines the economic power of retail chains too generally. They doubt that the legislation would effectively prevent the retail chains from abusing their power in relations with their suppliers, the news wire SITA wrote.

The draft defines the economic power of retail chains such that suppliers are completely dependent on them, Slovak food suppliers objected.

The draft amendment would remove the provision determining the power of a retail chain based on its sales or market share. Currently, the law on retail chains states that a retail chain has high economic power if its market share reaches 5 percent, or its annual sales exceed Sk1.5 billion (€37 million).

Rusko's draft also redefines the abuse of economic power so that a retail chain violates the law only if it forces a supplier to sell its products for a price lower than the sum of production and transportation costs.

The current law outlaws what are known as listing fees - payments from suppliers to retail chains to have their products included on store shelves. The act also bans supplier payments for retail chain marketing, obliges retail chains to pay suppliers for their products within 30 days, and forbids the labelling of products only by the retail chain's label.

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