In connection with these problems, the President of the Office of Competition and Consumer Protection, Tomasz Chróstny, imposed nearly PLN 140 million in fines on Kaufland Polska Markety in two decisions finding illegal practices. In two decisions regarding the Kaufland network issued at the end of December 2021, the President of UOKiK stated that the law was violated in both cases.
First decision – unfair use of contractual advantage
The first decision concerns the relationship between Kaufland Polska Markety and suppliers of agricultural and food products. The entrepreneur established the terms of cooperation with some of them after the beginning of a given year. In such situations, with prolonged contract negotiations for the next year, the supplier did not know on what terms he made deliveries in the period from the beginning of the year to the date of signing the contract. In the new contract, additional discounts were often introduced or the company increased the amount of the existing ones, and the suppliers had to pay compensation on this account. In practice, this meant a retrospective reduction of the already paid selling price of products to the Kaufland chain for the period from the beginning of the year to the date of signing a new contract.
The second practice, which was an unfair use of contractual advantage, consisted in charging some suppliers of agricultural and food products with additional discounts that were not provided for in the contract. Therefore, the business partner of the commercial network did not know when he would be asked to grant this discount, or what it would be.
The practice of negotiating a contract after the start of the year concerned over 800 contractors in 2018-2020, 72 of which had to pay unfavorable compensation for a total amount of nearly PLN 37 million. In turn, unfair retroactive discounts were obtained from 176 suppliers for a total amount of over PLN 30 million. Affected entities were largely small and medium-sized enterprises, as well as farms and producer groups. These were, among others meat plants, dairy cooperatives, producers of sweets, bakeries, processors of fruit and vegetables, fish, producers of beverages, snacks and cereal products.
– The principles of cooperation of the commercial network with suppliers, including discount conditions, should be clearly defined and known to the parties before signing the contract. Meanwhile, the contractors of Kaufland Polska Markety were not sure what remuneration they would receive for deliveries and whether the previously negotiated price would be lowered. The company’s actions were contrary to morality and constituted an unfair use of a stronger negotiating position. I have decided to impose a financial penalty of almost PLN 124 million on the entrepreneur. The fine was lowered due to the attitude of Kaufland Polska Markety, which ceased its practice during our investigation activities and before the entrepreneur was charged. The information provided to the Office by the network shows that it happened after I issued a decision regarding a similar practice against Jeronimo Martins Polska, says Tomasz Chróstny, President of the Office of Competition and Consumer Protection.
The decision is not final and may be appealed against in court. The decision does not prevent Kaufland network suppliers from claiming civil compensation. Thanks to the initiative of the President of the Office of Competition and Consumer Protection, the new act on contractual advantage, which entered into force on December 23, 2021, includes a provision giving the President of the Office the opportunity to present a significant view on the matter. This solution will provide legal support for an entrepreneur or farmer pursuing his claims in court from a large contractor in the agri-food industry.
– I can assure you that each supplier of agri-food products, who will seek compensation from a commercial network for unfairly collected rebates, can count on our support before the court. This applies not only to contractors of the Kaufland chain, but also to Biedronka, Eurocash and Intermarche, who were subject to previous decisions of the authority, says Tomasz Chróstny, President of the Office of Competition and Consumer Protection.
The second decision – incorrect labeling of vegetables with the country of origin
The inspections of the Trade Inspection confirmed that in Kaufland Polska Markety stores there are systematically situations in which the display of vegetables contains false information about their geographical origin. The inspectors compared the data on shop signs with those on collective or unit packaging and in delivery documents. For example, carrots in a store in Kalisz were to come from Poland, as it was apparent from the sign, and the collective packaging showed the Netherlands; in the outlet in Brzeg, the potatoes, according to the sign, were to be from Poland, and on the collective packaging – from Germany; onions in a shop in Dębica – the label showed the country of origin Poland, on the collective packaging – Germany; White cabbage at the facility in Gdańsk – according to the notice – was to come from Poland, and the collective packaging said that it was from Macedonia.
The President of UOKiK, Tomasz Chróstny, issued a decision in which he considered these practices a breach of collective consumer interests and imposed a fine of PLN 13.2 million on the company.
– The right to information is a fundamental right of every consumer. At the same time, product information must be accurate, clear and easy to understand for consumers and must not be misleading in any way. Inspections of the Trade Inspection confirmed that in Kaufland stores, consumers regularly received incorrect information about where the vegetables came from, which influenced their purchasing decisions, so I initiated proceedings in this matter and issued a decision. I ordered that consumers should not be misled and decided to impose a financial penalty on this retail chain – says Tomasz Chróstny, President of the Office of Competition and Consumer Protection.
The discount policy of retail chains is constantly monitored by the President of the Office of Competition and Consumer Protection. An example was the study of 19 retail chains on obtaining discounts from suppliers, as well as last year’s investigation, which checked the timeliness of payments and commercial policies of the 100 largest entities in the food sector, including retail chains. They resulted in decisions regarding Kaufland Polskie Markety and SCA PR Polska (Intermarche group). In addition, the President of the Office stated that Jeronimo Martins Polska, the owner of the Biedronka chain (decision of December 2020 regarding retroactive discounts not agreed in the contract), and Eurocash (decision of December 2021 regarding unfair fees charged to suppliers) was unfairly used by the President of the Office. Additionally, in April this year. The Office published a report on discounts, in which it presented, inter alia, what practices may be considered illegal.
In 2022, a summary of the study of the practices of retail chains related to collecting fees from suppliers (marketing, for the return of unsold goods, for newspapers, etc.) and the publication of a report in this regard is planned.
From January 2020 to June 2021, the Trade Inspection carried out inspections in 71 Kaufland stores throughout Poland (one third of all stores of this chain in Poland): Białystok, Bydgoszcz, Gdańsk, Gorzów Wielkopolski, Katowice, Kielce, Kraków, Lublin , Łódź, Olsztyn, Opole, Poznań, Rzeszów, Szczecin, Warsaw and Wrocław. She checked the marking, among others lots of potatoes, peppers, onions, garlic, cabbage, parsley, carrots, celery, tomatoes, cucumbers.
During the inspection, irregularities related to incorrect indication of the country of origin (placing other information on the label, and still other information on the collective / unit packaging) were revealed in an average of every third store (it was 27 Kaufland outlets out of 71 checked during the inspection). In all Kaufland stores where irregularities were found, a total of 215 batches of vegetables were inspected. The inspectors had objections to 53 parties. In the second quarter of 2021, the Trade Inspection visited 32 Kaufland stores to check whether the irregularities still occurred – in 14 of them the country of origin of the vegetables was incorrectly stated.
– Product labels must not be misleading – not only as to the price, but also the country of origin of the vegetables. The consumer should not be obliged to verify where they come from on the collective packaging. It is the seller’s job to provide reliable information. As a result, incorrect labeling of the country of origin of vegetables on the label leads to situations in which consumers’ decisions regarding the use of the offer are made as a result of having false information, adds the President of UOKiK.
The fine imposed by the President of UOKiK on Kaufland Polska Markety for misleading consumers amounted to PLN 13.2 million (PLN 13,284,944). Its height was influenced by the fact that violations occurred regularly and over a long period of time. Despite the control of the Trade Inspection and irregularities reported by inspectors, as well as complaints filed to the network, the company did not improve the labeling of vegetables to such an extent that it could be concluded that the cases of misrepresentation are marginal or individual. The decision is not final and may be appealed against in court.
Examples of IH audit deficiencies:
– green pepper offered in bulk – on the label of the collective packaging: Poland, on the display: Spain. Kaufland store in Jelenia Góra at ul. Jana Pawła II 24
– red onions offered in bulk: on the label of the collective packaging: The Netherlands, on the display: Poland. Kaufland store in Nowa Sól at ul. Chałubińskiego 2.
– potatoes offered in bulk – on the label of the collective packaging: Germany, on the display: Poland. Kaufland store in Brzeg at ul. Władysława Łokietka 24A.
– a bunch of carrots 500g, offered per piece – on the label of the collective packaging: Italy, on the label: Poland. Kaufland store in Dębica at ul. Rzeszowska 116.
– a bunch of radishes, offered in bulk – on the label of the collective packaging: Poland, on the label: Italy. Kaufland store in Kalisz at ul. Podmiejska 20.
– 150g habanero pepper offered in unit packages – on the unit package label: Morocco, on the label: Spain. Kaufland store in Warsaw at ul. Birżańska 1.
The portal Wiadomościhandlowe.pl asked the Kaufland network to refer to both decisions of the President of UOKiK. As soon as we receive the position of the network, we will publish it.