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19 March 2024
newsletter
serbia

North Macedonia's legislative response to unfair trade practices

competition, eu & foreign trade

To address rising prices within its own economy, exacerbated by worldwide economic trends and inflationary pressures, North Macedonia has taken a significant legislative step. On 13 March 2024, the Assembly of North Macedonia adopted the Prohibition of Unfair Trade Practices in the Supply Chain of Agricultural and Food Products Act (the "Unfair Trading Act"). This legislation not only aims to mitigate the impact of these economic challenges but also aligns closely with European Union standards on unfair trading practices.

Specifically, it harmonises with 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. The Unfair Trading Act stipulates a six-month compliance period from its enactment date, targeting suppliers and buyers to amend contracts for agricultural and food products concluded prior to the act's entry into force, aligning them with its envisioned mandatory contract provisions.

The Unfair Trading Act primarily targets the elimination of unfair trade practices within the agricultural and food product supply chain, ensuring fair operations across all stages, from production and processing to marketing, distribution and retail. Its goal is to safeguard the interests of both buyers and suppliers, ensuring that each participant in the supply chain benefits from more equitable business practices. Furthermore, the Unfair Trading Act establishes clear guidelines for evidence collection and outlines procedures for handling misdemeanours. It specifies how fines should be calculated for violations and details the decision-making process of the Commission for the Protection of Competition (the "Competition Commission") to determine the outcome of an offence.

Unfair trading practices

The Unfair Trading Act provides a clear definition of unfair trading practices, emphasising contractual provisions and business actions that leverage the buyer's significant bargaining power to impose terms on suppliers. This act envisages 26 unfair trading practices in total. These include (i) requiring payments not related to the sale of products, (ii) illegally acquiring, using or disclosing a supplier's trade secrets, (iii) demanding compensation for concluding a supply contract, and (iv) seeking compensation for services that are not provided.

Criteria for significant bargaining power

To address and rectify the imbalance of bargaining power, the Unfair Trading Act outlines specific criteria based on the annual revenue of suppliers and buyers:

  1. suppliers who have annual revenue of no more than EUR 2m and buyers who have annual revenue of no more than EUR 10m;
  2. suppliers who have annual revenue of more than EUR 2m but no more than EUR 10m, and buyers who have annual revenue of more than EUR 10m;
  3. suppliers who have annual revenue of more than EUR 10m but no more than EUR 50m, and buyers who have annual revenue of more than EUR 50m;
  4. suppliers who have annual revenue of more than EUR 50m but no more than EUR 150m, and buyers who have annual revenue of more than EUR 150m;
  5. suppliers who have annual revenue of more than EUR 150m but no more than EUR 350m, and buyers who have annual revenue of more than EUR 350m.

Mandatory contractual provisions

The Unfair Trading Act mandates the inclusion of specific provisions in contracts for the supply of agricultural and food products, ensuring these agreements are in writing and cover essential terms:

  1. price of agricultural and/or food products and the method of determination or price calculation;
  2. quality and type of agricultural and food products delivered to the buyer;
  3. conditions and deadlines for delivery of the agricultural and food products that are the subject of the contract;
  4. terms and deadlines for payment of the delivered agricultural and food products;
  5. place of delivery of the agricultural and food products;
  6. duration of the contract; and
  7. cancellation and termination of the contract.

In addition, the rebates that the supplier will approve to the buyer must not be higher than 10% of the realised turnover in the current year and must be clearly specified in the contracts for the supply of agricultural and food products.

The expanded role of the Competition Commission

Under the new legislation, the Competition Commission is granted additional powers and tools. This includes the authority to collaborate with the European Commission and bodies from EU Member States for the exchange of information and enforcement against unfair trade practices in the supply chain of agricultural and food products with cross-border implications.

Enforcement measures and penalties

The Unfair Trading Act specifies fines for non-compliance, distinguishing between lighter and more serious offences. The penalties for more serious offences range from EUR 1,000 to EUR 20,000, depending on the size of the company, while responsible individuals within these companies may face fines of EUR 50 to EUR 500. Heavier penalties apply to violations concerning the form and content of contracts for the supply of agricultural and food products as well as prohibited unfair trade practices. For lighter offences, companies can face fines of EUR 500 to EUR 6,000, depending on the size of the company, with responsible persons also facing fines ranging from EUR 50 to EUR 500. These are imposed for non-compliance with the Commission requests for data and for obstructing the Commission from obtaining evidence.

 

authors: Filip Zafirovski, Zoran Soljaga