William Malcolm

Makro Fined CZK 83 Million By Czech Competition Watchdog

The Makro Cash & Carry retail chain received a fine of CZK 83.1 million from the Office for the Protection of Competition (ÚOHS) for violating the Act on Significant Market Power. The decision is not final and an appeal can be lodged against it, the Office informed in a press release. The company fundamentally disagrees with the fine and will take further legal action, spokesman Roman Nýdrle said. According to the Office, the chain abused its power in dealing with suppliers. At the same time, the Office fined Metro International AG a fine of 316,000 crowns. Both companies, as purchasing alliances, violated the law in the sale of agricultural and food products.

“The companies negotiated contractual terms with their suppliers, which created a significant imbalance in the rights and obligations of suppliers as weaker parties. Makro’s suppliers were in a significant information asymmetry, as a result of which they were forced to enter into an accounting contract with Metro,” he said. The Office stated that this behavior dated from October 2016 to February 2020. The Office found such behavior towards five hundred suppliers.

The terms and conditions were unilaterally unfavorable, the suppliers could not choose whether or not they wanted to use Metro’s services and could not even influence the content of the contract. In addition, Metro received a different remuneration from the accounting service of the same definition in the form of a percentage of each invoiced amount for the sale of food to the Makro network. Adverse conditions were not compensated in any way.

In addition to the fine, the Office ordered both companies to inform their suppliers of the Office’s decision after it came into force and to provide them with a description of the central accounting system, and enable them to choose partial accounting services.

This is not the first such high fine imposed by ÚOHS Makru. In 2019, the chain had to pay a fine of 46.56 million crowns for obliging suppliers in the contracts from 2016 to 2018 to use its logistics and marketing services, for example, to reserve sales space. At that time, Makro used the so-called settlement procedure, cooperated with the Office, and the resulting fine was reduced by 20 percent.

Fines for abuse of significant market power are usually in the millions. These are usually different forms of listing fees in contracts with suppliers, which are issued for various services, but which the supplier usually does not need to use. In February 2019, the office imposed a fine of 164 million crowns on the chains Bill and Penny Market from the Rewe group for just such a procedure.