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The Czech Republic Significant Market Power Act Fundamentally Redesigned

The Czech Republic Significant Market Power Act Fundamentally Redesigned

Czech Republic
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As of 1 January 2023, a significant amendment to the Act on Significant Market Power takes effect.

An entity with significant market power will now be defined as a buyer of agricultural or food products whose annual turnover:

a) exceeds € 2 million and who falls within the defined turnover bands into a higher band than its supplier (e.g. a buyer with an annual turnover exceeding € 2 million vis-à-vis a supplier with an annual turnover under € 2 million, or a buyer with an annual turnover exceeding € 10 million vis-à-vis a supplier with an annual turnover under € 10 million), or

b) generated on the territory of the Czech Republic exceeds CZK 5 billion, provided that the market power of its business partner is not relevant in this case.

If one of these criteria is met by your group (regardless of whether food or agricultural products make up only a small part of your product range), please pay close attention to the following message.

Even in the face of opposition from the professional public, the amendment passed through the legislative process in a much stricter form than required by the European directive it was supposed to implement.

Obligations that previously applied to about eight food retail chains will now apply to a multiply wider range of persons, primarily for the following reasons:

I. the newly introduced threshold of € 2 million is substantially lower than the original threshold of CZK 5 billion,

II. the turnover threshold is now calculated on any turnover (and not on turnover specifically related to food purchases, as was previously the case),

III. the new regulation affects not only food buyers but also buyers of agricultural products (e.g. semi-finished food or ingredients),

IV. the new regulation affects not only the end buyers (level above consumers), as it was in the application practice to date, but also all buyers upstream in the supply and offtake chain.

The turnover of the whole group is relevant for these purposes.

Entities with significant market power are not only restricted under severe penalties, what contractual terms they can agree with a supplier, buyer, processor or distributor, but also in the way they deal with these business partners.

Our law firm has extensive experience with the application of the Significant Market Power Act and the necessary adjustments to supplier-buyer contractual documentation.

By Michal Hrabovsky, Head of Competition, Eversheds Sutherland

Eversheds Sutherland at a Glance

Eversheds Sutherland with offices in Bratislava and Prague and as part of an international network, provides comprehensive legal advice also in foreign jurisdictions.

Our team consists of a total of more than 40 lawyers in the Czech Republic and Slovakia, most of whom have previously worked at major international and local law firms and have extensive experience in particular in the areas of corporate law, including mergers and acquisitions, capital markets, real estate, employment law, competition law, litigation and arbitration, energy, infrastructure, as well as environmental and ESG law.

Our advisory services are offered in Slovak, German, Czech and English language. Members of our team include attorneys registered with the Austrian Bar Association. On this basis, and because we are part of Eversheds Sutherland, we are also able to offer extensive legal support on various foreign legal issues.

We listen to our clients, we understand their business and we also understand what they need. So we can always find the best solution for the particular situation. We work quickly, efficiently and take responsibility for our work.

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