Change in legislation

22 April 2010

Gergely Juhasz, Dr Titusz Puskár

A new law prohibits unfair trade practices between retailers and suppliers in the Hungarian consumer food sector

The aim of Act XCV of 2009 is to create a transparent and fair commercial environment on the Hungarian food retail market. The Act, effective since 1 January 2010, protects consumer food product suppliers from the potentially unfair trade practices of retail companies by way of prohibiting the use of a number of contractual provisions in supplier contracts, such as:

  • Mandatory re-purchase of unsold stocks (at an unfair price);

  • Charging unusual, extra or commercially not justifiable fees to the suppliers;

  • Applying payment deadlines longer than 30 days after delivery or rebates for the supplier if there is no payment default;

  • Applying one-sided contractual sanctions;

  • Placing orders at unreasonable deadlines;

  • Permitting the retailer to unilaterally amend the terms and conditions of the supply contract without specific and/or justifiable reasons; or

  • Restricting the supplier from the lawful use of its own trade mark.

In addition to the above, each supplier whose net turnover was higher than HUF 20 billion (ca. EUR 74 million) in the preceding financial year must prepare, update, publish and file with the competent government agency (the Hungarian Agricultural Office), its boilerplate terms and conditions applicable to its suppliers.

Terms and conditions of supplier contracts which set out any of the prohibited trade practices are null and void under Hungarian civil law since 1 February 2010. Furthermore, the competent government agency may impose a fine between HUF 100,000 (ca. EUR 380) and HUF 500 million (ca. EUR 1,870,000) depending on the circumstances of the case. The Hungarian Agricultural Office may start its investigations either ex officio or upon the complaint of a professional interest group and the fine must be paid within 15 days as from the delivery of the decision of the authority. If, within a two-year consecutive term, the distributor violates the above prohibitions again, the amount of the fine will be at least 1.5 times the fine imposed in the previous proceedings, but in any case between HUF 500,000 (ca. EUR 1,800) and HUF 2 billion (ca. EUR 7,480,033), unless the amount of such fine would exceed 10% of the previous year’s net turnover. Decrees of such investigations may be appealed against at the competent civil court.

Retailers who conduct unfair market practices will be named and shamed on the web site of the Hungarian Agricultural Authority and that of the Ministry of Agriculture.