Czech Republic: Investigation into food re-purchasing contract provisions leads to supply chain compensation

The Czech Office for the Protection of Competition (the “Office”) has concluded two proceedings with groceries store chain HRUŠKA, spol. s.r.o. (“HRUŠKA”), following an investigation into potential abuse of a dominant market position. The investigated practice entailed negotiating contract provisions for a so-called “full-scale service”, forcing suppliers to buy back food products nearing their expiry date. After HRUŠKA committed itself to compensate suppliers for all payments made under these provisions, the Office suspended the proceedings without imposing a fine on the store chain.

From 2016 until 2021, HRUŠKA concluded supply contracts with groceries producers which frequently contained clauses obliging the producers to provide a “full-scale service”. The service was based on allowing HRUŠKA to return purchased food products back to the suppliers at the end of their expiry date, or to extend a discount onto these unsold products through an accounting operation. The suppliers were contractually obliged to re-purchase their produce and to bear the costs of the transaction.

According to the Office, this practice constituted a potential abuse of a dominant position, as HRUŠKA was able to shift the risks and losses of selling groceries with expiry dates onto their suppliers entirely. The Office also found that HRUŠKA proceeded to apply these provisions in practice with numerous suppliers.

To avoid a potential fine, HRUŠKA offered to remedy the situation by compensating 74 of its suppliers, who have been affected by the “full-scale service” provisions and made return payments to HRUŠKA. The total to be returned amounts to over CZK 39 million (approx. EUR 1.5 million), to be paid within 8 months. Furthermore, HRUŠKA has committed to remove all “full-scale service” clauses from its contracts and to provide the Office with a list of internal measures to be implemented. These must ensure that provisions in breach of abuse of dominant position regulation do not find their way into the company’s future supply contracts. Under the condition that these commitments are fulfilled, the Office suspended the proceedings.

The decision illustrates clear limits of risk sharing in supply-chain relations, as well as indicating the benefits of cooperation in investigation proceedings, potentially enabling alternative solutions to fine imposing.

For more information, please contact Vojtěch Chloupek and Martin Taimr.

Visit our Competition & EU homepage