On 7 April 2021, the Saeima adopted the Unfair Retail Trade Practices Prohibition Law (hereinafter – the URTPPL), the purpose of which is to prohibit unfair trade practice throughout the agricultural and food products supply chain, as well as to prohibit use of procurement power by non-food products retailers against suppliers. The enforcement of the Law will be supervised and controlled by the Competition Council of Latvia (hereinafter – the CC), whereas the former Unfair Retail Trade Practices Prohibition Law supervised by the CC will become void.
The URTPPL will come into force and will be applied starting from 1 November 2021. The purpose of the Law is to adopt in one law the European Parliament and the Council Directive on unfair trading practices in business-to-business relationships in the agricultural and food supply chain, as well as the Unfair Retail Trade Practices Prohibition Law, which restricts use of procurement power of retailers against suppliers. The Directive provides for protection of suppliers and is aimed at protecting the smallest market players from unfair trade practices by larger companies.
The new Law sets out several prohibitions for a buyer, addressing unilateral making of amendments to the agreement, payment requests not related to selling of goods of the supplier and requesting of compensations from the supplier for costs related to examination of complaints of customers, unless such complaints are justified. The buyer also will be prohibited from cancelling orders of goods with a too short term, change orders of goods shortly before delivery or ensure the lowest price, thus restricting the freedom of suppliers to agree with another retailer of goods on a lower price. In order to avoid putting smaller suppliers in terms of turnover in a less favourable position than the larger ones, the CC indicates that requirements of the URTPPL will apply to all participants of the trade chain, regardless their turnover.
Svetlana Sitņikova, the Senior Expert of the Analytical Department of the CC: “The most problematic and topical issues in this area we have observed is returning of goods, failure to observe payment deadlines for delivered goods, and unfair or groundless payments, or discounts that retailers request from suppliers. Also, various unjustified sanctions or contractual penalties, which can be imposed by the merchant on the supplier for violations of the agreement or delays of the delivery term.”
The CC will control and supervise enforcement of the URTPPL, examining applications on infringements of the Law, related to the economic activity of the supplier, buyer or retailer of non-food products in Latvia. In cases of infringements of the Law, the CC will be able to initiate investigation cases and, upon detecting any infringement mentioned in the Law, to issue a warning or impose a fine up to 0.2% of the retailer's or buyer's net turnover in the last reporting year, but not less than 70 euros, or any other equally efficient penalty. At the cross-border level, the CC will have the opportunity to cooperate with other executive institutions of EU Member States and the European Commission in investigation of alleged infringements. Whereas compliance of the agricultural and food products agreements, concluded before publishing of the URTPPL, with the requirements of the Law have to be ensured within one year from the date of publishing of the Law.