Unfair trading practices in the agricultural and food supply chain in Bulgaria

Specific regulations of unfair trading practices in the agricultural and food supply chain are introduced into Bulgarian legislation in relation to the transposition of the Directive, by an Act for the amendment and supplement (the “Amendment”) of the Protection of Competition Act, adopted Issue 102/28 November 2008 as amended (“PCA”). The Amendment was  adopted by the National Assembly of the Republic of Bulgaria on 11 February 2021 and was promulgated in the State Gazette on 26 February 2021.

The new Chapter VII “b” of the PCA, which deals with unfair trading practices in the agricultural and food supply chain, will enter in force on 1 November 2021. Supply agreements entered before 1 November 2021 must be aligned with the new regulation not later than the end of February 2022.

The regulation of unfair trading practices in the agricultural and food supply chain aims to protect suppliers subject to annual turnover thresholds that are in line with the Directive.

More specifically, the new rules will apply to trading practices related to the sale of agricultural and food products by:

1. a supplier with an annual turnover not exceeding BGN 3 911 000 to a buyer having an annual turnover exceeding BGN 3 911 000;
2. a supplier with an annual turnover greater than BGN 3 911 000 and lesser than BGN 19 558 000 to a buyer with an annual turnover greater than BGN 19 558 000;
3. a supplier with an annual turnover greater than BGN 19 558 000 and lesser than BGN 97 791 000 to a buyer with an annual turnover greater than BGN 97 791 000;
4. a supplier with an annual turnover greater than BGN 97 791 000 and lesser than BGN 293 374 000 to a buyer who has an annual turnover greater than BGN 293 374 000;
5. a supplier with an annual turnover greater than BGN 293 374 000 and lesser than BGN 684 540 000 to a buyer with an annual turnover greater than BGN 684 540 000; (vi) a supplier with annual turnover not exceeding BGN 684 540 000, to a buyer who is a public authority.

The annual turnover of the respective supplier and buyer includes their net revenue from their ordinary business in the previous financial year.

The prohibited unfair trading practices are specifically listed in two groups – “absolute bans” (black trading practices) and “conditional prohibitions” (grey practices).

The first group of bans listed in Article 37b of the PCA includes “absolute bans” on:

1. imposing payment terms: (a) for delivery of perishable and other agricultural and food products on a regular basis – later than 30 days after the end of an agreed delivery period in which deliveries have been made or later than 30 days after the date on which the amount payable for that delivery period is set, whichever of those two dates is the later; (b) where the supply agreement does not provide for the delivery of perishable and other products on a regular basis - later than 30 days after the date of delivery or later than 30 days after the date on which the amount payable is set, whichever of those two dates is the later;
2. cancelation of order by the buyer of perishable agricultural and food products with a less than 30-day notice where the supplier cannot reasonably be expected to find alternative means of commercialising or using  those products;
3. unilateral changes by the buyer of the terms of a supply agreement that concern the frequency, method, place, timing or volume of the supply or delivery, the quality standards, the terms of payment or the prices, or as regards the provision of services insofar as these are explicitly referred to in Article 37c of the PCA (Conditional Prohibitions);
4. the buyer requires payments from the supplier that are not related to the sale of the agricultural and food products of the supplier;
5. the buyer requires the supplier to pay for the deterioration or loss, or both, of agricultural and food products that occurs on the buyer's premises or after ownership has been transferred to the buyer, where such deterioration or loss is not caused by the negligence or fault of the supplier;
6. the buyer refuses to confirm in writing the terms of a supply agreement between the buyer and the supplier for which the supplier has asked for written confirmation; this shall not apply where the supply agreement concerns products to be delivered by a member of a producer organisation, including a cooperative, to the producer organisation of which the supplier is a member, if the statutes of that producer organisation or the rules and decisions provided for in, or derived from, those statutes contain provisions having similar effects to the terms of the supply agreement;
7. the buyer unlawfully acquires, uses or discloses trade secrets of the supplier within the meaning of the Bulgarian Trade Secret Protection Act;
8. the buyer threatens to carry out, or carries out, acts of commercial retaliation against the supplier if the supplier exercises its contractual or legal rights, including by filing a complaint before the Commission for Protection of Competition (“CPC”) or cooperating with the CPC in an investigation under the provisions on unfair trading practices; 
9. the buyer requires compensation from the supplier for the cost of examining customer complaints relating to the sale of the supplier's products despite the absence of negligence or fault on the part of the supplier;
10. prohibitions or restriction on the supplier to offer or purchase goods or services to or from third parties;
11. prohibitions, restrictions or imposition of sanctions on the supplier for providing the same or better commercial conditions to third parties;
12. unilateral and unjustified termination of the contract by the buyer or termination without notice within a reasonable time sufficient for the supplier to cover its investment costs, in view of the previous trade relations of the parties to the contract.

Conditional prohibitions are included in Article 37c of the PCA. This  second group of provisions includes practices that are permissible if agreed upon in clear and unambiguous terms in the supply agreement or in a subsequent agreement between the supplier and the buyer, and includes the following practices:

1. return to the supplier of unsold products that the buyer has not paid for or paid the cost of their disposal;
2. imposition of fees on the supplier for stocking, displaying or listing its agricultural and food products, or of making such products available on the market;
3. imposing on the supplier of payment of all or part of the cost of any discounts on agricultural and food products that are sold by the buyer as part of a promotion, unless the buyer, prior to a promotion that is initiated by the buyer, specifies the period of the promotion and the expected quantity of the agricultural and food products to be ordered at the discounted price;
4. the buyer requires the supplier to pay for the advertising by the buyer of agricultural and food products;
5. the buyer requires the supplier to pay for the marketing activities of the buyer;
6. imposing fees on the supplier for equipment and/or maintenance of premises used for the sale of the products;
7. imposing of transport and/or logistics costs on the supplier;
8. imposing of backdated price reductions of products directly or by applying unjustified discounts, bonuses and fees or services provision.

The competent authority to enforce the UTP prohibitions is the Commission for Protection of Competition of the Republic of Bulgaria (“CPC”).

The proceedings in front of the CPC regarding unfair trading practices in the agricultural and food supply chain may be initiated  either on: (i) a decision of the CPC on its own initiative; or (ii) the request (complaint) of suppliers of agricultural and food products, organisations of agricultural producers, suppliers' organisations, and associations of such organisations, at the request of one or more of their members or other organisations with legal interest to represent suppliers upon a request of such supplier, provided that such organisations are non-profit legal entities.

The CPC has the same powers to conduct investigations as set out in Article 6 of the Directive, including the power to undertake unannounced on-site inspections (dawn-raids). 

Buyers of agricultural and food products can face fines in the range of  BGN 5 000 (ca. EUR 2,500) to  BGN 300 000 (ca. EUR 150 000) for violation of any of the specified unfair trading practices. Other sanctions, e.g.for failing to cooperate with an investigation by the CPC or to comply with a decision of the CPC, might also apply.

The regulation on unfair trading practices in the agricultural and food supply chain are not in force yet. Therefore, no enforcement procedures have taken place so far.

There used to be a prohibition on the abuse of a ‘stronger bargaining position’ which was revoked with the Amendment. Introduced in 2015 as Article 37a of the PCA, the concept was applied in all sectors of the economy. Under this, economically dependent partners were often able to claim anti-competitive behaviour by contractual partners even if they did not enjoy a dominant position in their respective market. 

The new regulation on unfair trading practices in the agricultural and food supply chain is included as a new chapter VII “b” of the PCA. Thus, the transposition of this legislation into Bulgarian law is complete.   

Yes, there are a few obligations that appear to be more restrictive than those under the Directive.

For example, regarding “other” agricultural and food products (i.e. such that are not perishable), the Directive prohibits the buyer from paying the supplier, whether for deliveries of products on a regular basis or not, later than 60 days after the end of an agreed delivery period in which deliveries have been made or later than 60 days after the date on which the amount payable for that delivery period is set, whichever of those two dates is the later. Under the Amendment this term is shorter: 30 days, and longer terms would violate the law. 

Further, absolute prohibitions (x), (xi) and (xii) and conditional prohibitions (vii) and (viii) (see question 3 above) are included in the PCA in addition to the requirements of the Directive.