THE AGRICULTURE Ministry has again pushed through legislation banning unfair terms in retail chains, with the aim of improving the position of producers and suppliers of Slovak food products. The law, effective as of the beginning of 2013, has provoked criticism from retail chains and the parliamentary opposition, who claim that it will have the opposite effect. Many retailers and shopping experts are also warning that the measure will actually decrease the share of local products on the shelves of Slovak shops.
This is not the first time that Slovakia has seen such a law. The first Fico government adopted a similar act in 2010, whose stated objective was to protect Slovak food producers and to increase the number of local food products on shops’ shelves. The Radičová government repealed the law in June 2011.
According to the Agriculture Ministry, the use of unfair practices by large retailers has reduced the share of products from Slovak suppliers in favour of imported foods. While in 2008 the share of locally produced basic food products on the shelves of Slovak stores was about 56 percent, in 2011 it was only around 47 percent.
“Such a [low] share has not been registered in any other neighbouring country,” the Agriculture Ministry wrote in an explanatory text accompanying its proposed law on unfair terms in merchant relations whose subject is groceries.
The ministry also points out that international food companies can more easily adapt to retail chains’ conditions than the small and medium-sized companies which comprise most Slovak suppliers.
Parliament adopted the law on unfair terms in merchant relations whose subject is groceries on October 26, 2012. The new legislation became effective as of January 1, 2013 and retail chains have until February 28 to adjust their existing contracts to meet the terms of the new law. The law defines as unreasonable conditions such as the requirement of a fee for inclusion of a supplier in the register of suppliers, a fee for the inclusion of a food product on the record of sold products, as well as financial benefits for services that are not provided. A merchant can be fined between €1,000 and €300,000 if such inappropriate terms are anchored in a business contract with a supplier. In total, the law lists about 40 inappropriate terms.
As well as resistance from the opposition, the law has come in for criticism from the economy minister, Tomáš Malatinský. He told the TA3 news channel in early January that the new rules could very easily be bypassed, meaning that the law would miss its objective and might even negatively affect Slovak producers.
Zsolt Simon, an MP for Most-Híd and a former agriculture minister, described the bill as “plainly wrong”. He said merchants would get around it by concluding contracts with suppliers from abroad, which would further disadvantage local suppliers and result in a reduced share of Slovak-origin food being sold through retail chains, according to the SITA newswire.
Pavol Konštiak, president of Slovakia’s Trade and Tourism Association (ZOCR), believes that retailers are not solely to blame for the lack of Slovak products on the shelves of Slovak stores, and he sees several reasons behind the low market share of Slovak goods. Among these he lists the failure of Slovakia to win concessions from the EU similar to the subsidies that he says Poland has secured for its farmers. Slovakia also has a higher rate of value added tax on grocery products than the Czech Republic and Poland. All these things affect the prices of Slovak products, he says.
“There is also free movement of goods and services in the EU, so there is plenty of competition and each store tries to draw shoppers with the best products possible,” Konštiak said on October 26, as quoted by TASR. “In doing so it searches for a balance between quality and price.”
Retail chains say that the law on unfair terms in retail chains discriminates against Slovak producers and makes Slovak products more expensive.
Gabriel Csollár, chairman of the board of directors of the Coop Jednota Slovensko retail cooperative, last November voiced concerns that the law would not achieve its goal of increasing the range of Slovak products on the shelves of Slovak shops.
“Instead, we think that the law will restrict the free form of doing business because it enters the relationship between two subjects – supplier and consumer [i.e. the retail chain],” Csollár said, as quoted by the TASR newswire. “But it does not enter the relationship in equal terms, but prefers one of them – the supplier.”
The CBA retail chain has already reduced the number of Slovak suppliers it uses as a result of the law.
“We planned to terminate cooperation with some suppliers; the change in legislation has helped us to speed up this decision,” Vladimír Kocourek, vice-president of CBA, said in early January, as quoted by the Sme daily.
Tomáš Bezák from the Lidl retail chain points out that the law bans sale below purchase price, i.e. the price which retailers pay for the goods they offer to consumers, and thus also curtails the opportunity to offer customers deals and discounts.
Zuzana Lošáková, spokesperson for Tesco in Slovakia, shares Bezák’s opinion.
“The law does not enable merchants to make, in cooperation with suppliers, such attractive offers as was possible before,” Lošáková said, as quoted by Sme.
Billa, another large chain, would not rule out replacing domestic suppliers with foreign ones.
“The effects [of the law banning unfair terms] are not instant, but they may be damaging over the long term,” said Martina Kovacs, marketing manager at Billa, as quoted by Sme.
4. Feb 2013 at 0:00 | Jana Liptáková