ZNTP AMENDMENTS: SHORT BUT SIGNIFICANT CHANGES IN THE FOOD SUPPLY CHAIN

The Act on Amendments to the Act on the Prohibition of Unfair Trading Practices in the Food Supply Chain (“Narodne novine” No. 27/24) (hereinafter: the “ZNTP Amendments”), adopted on 6 March 2024, introduced changes to the currently valid Act on the Prohibition of Unfair Trading Practices in the Food Supply Chain[1] (hereinafter: the “ZNTP”), which, among other things, finally align its provisions with the introduction of the euro as the official currency in the Republic of Croatia.

Although the amendments are not extensive in quantitative terms, some of them will significantly affect contracts between buyers and suppliers in the retail supply chain, which has a substantial impact on Croatia’s GDP through private consumption (the largest component of Croatia’s GDP), as well as on the practice of the Croatian Competition Agency (hereinafter: the “Agency”). The ZNTP Amendments entered into force on 14 March 2024.

The following text provides a detailed explanation of all amendments to the ZNTP, together with brief justifications and clarifications of each change.

Removal of the definition of final selling price

Article 2(1) of the ZNTP has been amended by removing the provision defining the final selling price as the price at which a retailer sells a product to the end consumer. Previously, this price had to be formed by multiplying the purchase price of agricultural and food products by at least a coefficient of 1.10.

With this decision, the legislator completely removed the prescribed relationship between purchase and final selling price, allowing buyers acting as traders to set the minimum selling price of agricultural and food products at the level of the purchase price. This effectively restricts the buyer’s freedom to independently set prices. It leaves room for buyers, as sellers, to adjust prices down to the purchase level, with the sole obligation not to sell below the purchase price (although ZNTP provides certain exceptions). In general, however, the selling price must remain above the purchase price, subject to compliance with the Trade Act.

As a result, one of the explicitly listed unfair trading practices was also removed—namely, the sale of production- and market-sensitive agricultural and food products below the final selling price. These products include milk and dairy products, fresh beef/veal, pork and poultry meat, eggs, fresh fruit and vegetables, flour and bread, sugar, and edible vegetable oils.

Changes in determining buyers with significant bargaining power

The most significant amendment concerns the criteria for determining a buyer with significant bargaining power under the ZNTP.

First, as noted above, provisions were aligned with the euro, and the total annual turnover threshold for determining such buyers is no longer HRK 15,000,000 but EUR 2,000,000. This means the required annual turnover is slightly higher than before by EUR 9,158. Although this adjustment deviates from the general rule under Article 14 of the Act on the Introduction of the Euro as the Official Currency in Croatia, the previous amount was originally derived from Directive (EU) 2019/633, and therefore the Directive’s thresholds are now used directly.

In practice, given that average buyers in this sector have annual revenues of tens of millions of euros, this change is not significant. However, the introduction of additional criteria for determining significant bargaining power is of major importance.

In addition to the turnover threshold, a new requirement has been introduced: the buyer must be financially stronger than the supplier. This is further supported by the deletion of the provision stating that the supplier’s total annual turnover is not relevant in determining the buyer’s bargaining power.

A new provision also defines the method for calculating the supplier’s annual turnover, which is identical to that used for buyers (Articles 3(3) and 3(4)).

It remains to be seen in practice how buyers will structure contracts with suppliers of similar financial strength, and how changes in relative financial positions over time will be addressed.

Nevertheless, introducing turnover criteria for suppliers is a positive development, as turnover alone was previously an insufficient and illogical criterion. The ZNTP is thus better aligned with Directive (EU) 2019/633 regarding the assessment of bargaining power.

Changes to mandatory contract content

The provisions regulating payment deadlines for food and agricultural products have been partially amended. The starting point for calculating payment deadlines may now also be the date of invoice receipt. The distinction between regular and irregular deliveries and between perishable and non-perishable goods remains unchanged.

Changes to other unfair trading practices

Article 11 has been partially amended as follows:

Order cancellations

Cancellation of orders for perishable agricultural products is now considered unfair if the cancellation occurs so close to delivery that it is unreasonable to expect the supplier to find an alternative market. A period shorter than 30 days is always considered too short. This effectively extends the protection period for suppliers.

Fees and charges

The scope has been expanded to include perishable and market-sensitive products in cases involving fees or charges imposed by buyers.

Fictitious services

A new rule prohibits requiring suppliers to agree to fictitious services or procedures that will not be performed and for which no counter-performance exists.

Clearance sales

Retailers are now allowed to sell products below purchase or production cost in the case of seasonal store closures.

Amendments on exceptions to prohibitions

Contractual criteria for payments must now be based on objective, reasonable, and pre-established criteria, ensuring that suppliers are informed in advance.

In promotional campaigns, suppliers now determine the quantity of products sold at promotional prices, improving their contractual position.

Procedural changes

The Agency’s procedures have been revised. In cases of non-compliance, it will initiate proceedings, issue a notice of preliminary findings, and conduct an oral hearing before issuing a decision.

Terminology has been aligned with the General Administrative Procedure Act, and transparency has been improved by requiring publication of court decisions related to Agency rulings.

Penalties have also been converted to euro amounts.

Final provisions

Procedures initiated before the entry into force of the amendments will be completed under the previous version of the Act. Administrative disputes will be governed by the law under which the contested decisions were adopted.

[1] Act on the Prohibition of Unfair Trading Practices in the Food Supply Chain (Official Narodne novine 117/17, 52/21)[2] Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain