On 21 May, the Saeima adopted new Unfair Retail Practice Prohibition Law and related amendments to the Competition Law in order to balance interests of retailers and their suppliers. The law is designed to prevent food retailers from using their market power to apply exploitative requirements to suppliers.
The new regulation prohibits the food retailers to set an unfairly long settlement periods for supplied goods, as well as to change orders of food products two days or less before the date of supply. Thus, the settlement period for, e.g. fresh vegetables and berries that are supplied at least three times a week, will be considered as unfairly long if it exceeds 20 days from the date of supply.
It is intended that retailers will not be allowed to require suppliers to pay or to refund otherwise for signing an agreement, e.g. paying so-called entry free or shelf fee for placing goods in the shop. Furthermore, for retailers it will be prohibited to obligate suppliers to compensate for loss of retailers’ earnings against sold goods, as well as to require to cover expenses which are related to renovation of store or establishing of a new store, as well as to restrict freedom of suppliers to agree on lower price with other retailer.
For such prohibited actions the Competition Council of Latvia will be entitled to impose retailers with a fine up to 0.2% of the net turnover of an undertaking for the previous financial year, but not less than 70 EUR.
The law enters into the force in 1 January 2016. The law was drafted to prevent exploitative actions of retailers who tend to apply unfavourable conditions to suppliers, causing delays of payments to producers or imposing various payments. The law will balance cooperation between retailers and suppliers and extend the requirements of fair cooperation to all retailers, contrary to the previous regulation that referred only to the largest retailers.