Legal framework

The Act on the prohibition of unfair trading practices in the business-to-business food supply chain, Official Gazette 117/17, entered into force on 7 December 2017 and empowered the Croatian Competition Agency (CCA) for the enforcement of the provisions concerned.

The Act on prohibition of unfair trading practices in the business-to-business food supply chain (hereinafter: UTPs Act) establishes the rules and effective redress mechanisms to eliminate UTPs being imposed by a trading partner in the food supply chain where a superior bargaining position is abused by the buyer and/or the processor or the re-seller with respect to the supplier.

The UTPs Act wants to establish, ensure and promote the fair-trading practices that would protect the participants in the food supply chain.

Mandatory steps in the proceeding

Here we deal with a complex investigation that requires a multidisciplinary approach to each specific case where all the relevant facts substantial for the adoption of the decision in any particular case have to be examined. Due to legal formalism and procedural principles there is no way to shorten the proceeding. All the more so, it is not possible to circumvent any of the mandatory steps of the proceeding considering the fact that the only legal remedy of the dissatisfied party is to bring actions against the decision of the CCA and file an administrative dispute, actually meaning that the procedure must be carried out in its entirety, in other words, all procedural steps must be taken and all evidence that is necessary for the adoption of the decision on the merits adduced, ensuring the rights of the parties relating to their procedural rules with the view to protecting their constitutional and other rights under the law.

The expert staff of the CCA is empowered to carry out the proceeding falling under the scope of the CCA. All CCA experts are all lawyers that passed the bar exam and have at least four-year-experience on similar jobs. In the part of the proceeding relating to economic issues, there is a team of expert economists engaged on the case.

The proceeding (investigation) can be divided into five parts:

1. First part of the investigation: Gathering of written information, data, agreements and other documentation

In the administrative proceeding concerned the CCA collects written information, data and documentation from the parties to the proceeding and other legal or natural persons that are not parties to the proceeding concerned, associations, professional organisations and economic interest organisations, chambers etc. (Article 17 of the UTPs Act). The received information is analysed from the legal and economic point of view and the relevant facts and circumstances of the case at issue are established relating to the total annual turnover of the trader, buyer or processor concerned, including possible abuse of strong bargaining power by imposing unfair trading practices and the sanctioning for the infringements.

Although the investigation is mostly carried out by gathering of written information, data, agreements and other documentation there are situations where direct observation or explanation of some key issues is necessary for the establishment of the facts of the case. Where it proves necessary, on-the-spot investigation is conducted.

1. Second part of the investigation: Oral hearing

With the objective of establishing all the facts of the case necessary for the clarification of the concrete situation but also taking into account the rights of the parties and their legal interest that must be ensured and protected, oral hearing is conducted.

Evidence is adduced in the oral hearing. The parties and witnesses are heard (in most cases this is a supplier that was allegedly imposed unfair trading practices) and an expert witness (in situations where the knowledge of the CCA expert staff does not suffice, such as in the area of farming, quality system, chemistry engineering, technology etc.)

At this stage the party against which the proceeding is conducted bears the right to explain all the circumstances and facts presented in the investigation, orally or in writing, reflect on the proposals for demonstration of evidence and evidence adduced, take part in the presenting of evidence and hear witnesses and expert witnesses, put questions and be informed about the evidence results and go on record about the evidence results.

III. Third part of the investigation: Decision of the Competition Council about the established facts of the case

After having established all the relevant facts of the case the expert staff of the CCA informs thereabout the Competition Council[1] that adopts a positive (infringement) or a negative (non-infringement) decision within the meaning of UTPs Act.

1. Fourth part of the investigation: Notice about the established facts of the case communicated to the party together with the call for main hearing

Where the Competition Council adopts the decision that states that the party violated the UTPs Act by imposing unfair trading practices on its supplier, this is where the procedure for defining the conditions for setting fines is opened.

At this stage of the investigation the CCA submits to the party to the proceeding:

– a notice about the established facts of the case in the case concerned,

– a notice about the content of the decision of the Competition Council adopted on the basis of the established facts of the case, and

– a notice of hearing calling for the main hearing and submittal of written defence.

The main hearing shall ensure that the party against which the proceeding is conducted enjoys its right to be heard and protect its interests, concretely, to present evidence in the sense of defining the condition for setting fines, including the demonstration of mitigating and aggravating circumstances that affect the criteria for setting the amount of the fine.

1. Fifth part of the investigation

After the main hearing the Competition Council adopts its decision defining the conditions for setting the fine, determines the amount of the fine and sets the deadlines for payment.

Concretely, the CCA adopts one integral decision in which it determines the infringement of the UTPs Act and imposes the fine for the infringement, based on two previously taken decisions by the Competition Council, first, the decision establishing abuse of strong bargaining power by imposing unfair trading practices (infringement decision), and, second, the decision defining the conditions for setting the fine and determining its amount.

This final decision of the CCA is published on its web site, saved for the information classified as a business secret.

[1] The Competition Council is a body consisting of five members who run the CCA and adopt all the decisions within the meaning of the UTPs Act, in other words, it resolves and decides in an administrative case based on the established facts of the case within the investigation that has been previously conducted by the expert staff of the CCA within the meaning of UTPs Act.