Slovakia: inappropriate business terms to be outlawed

Legislation to prohibit inappropriate terms and conditions of business in Slovakia has been adopted by the National Council and will come into force on 1 January 2009.

The key points of the new law are:

• to counter suggestions that retail chains would be able to circumvent the provisions, the provisions are restrictive and apply to all agreements to purchase goods in the Slovak Republic, even where one of the parties is a foreign company
• inappropriate terms in business contracts only arise between suppliers and retailers/resellers when one party is economically dependent on the other
• economic dependence includes the situation when a party has to accept inappropriate terms because it can only obtain similar or identical terms from other businesses
• parties cannot agree between themselves what terms are and are not inappropriate. However, they may adopt an ethical code detailing the criteria for a fair and transparent relationship, defining their own inappropriate terms and conditions and designating someone with authority to act over the use of such terms
• there are two controlling bodies supervising compliance: the Agriculture Ministry where food is involved and the Economy Ministry for all other goods
• compliance can also be encouraged by the parties themselves, public bodies and authorised professional bodies
• the controlling bodies will only look at information and activities which can help them determine whether or not there is economic dependence and whether or not an inappropriate term has been used
• where a controlling body finds an inappropriate non-financial term, the party in whose favour it was agreed may be fined up to €300,000. The maximum fine is €150,000 for an inappropriate financial term
• when deciding on the level of fine, the controlling body will consider the substance of the unlawful act, its implications and duration and whether or not the act was repeated

Inappropriate financial terms

Inappropriate financial terms enable a retailer to make a supplier pay an annual amount exceeding 3% of its yearly sales to a retailer (excluding VAT and excise duty) in return for:

• being able to trade with the retailer
• inclusion in the retailer’s supplier listings
• inclusion of its goods in the retailer’s listings (or for the electronic listing process)
• use of the retailer’s distribution network (except where there is no other way for the supplier to deliver goods in the same volume to the same location)
• time-limited placement of its goods at the retailer’s shop
• placement of its goods in an exposed place at the retailer’s shop (not exceeding 5% of the overall storage area)

Inappropriate non-financial terms

Inappropriate non-financial terms enable a retailer to:

• control a producer’s or supplier's premises, including analysing or testing goods, when there is a valid record of official control (except where the retailer plans to sell the goods under its own brand and assumes the manufacturer's obligations or performs controls at its own expense)
• return goods to the supplier without a legal reason at [the supplier’s] expense
• require goods to be replaced without justification at the seller’s expense
• take more than 30 days from delivery of the invoice to pay for goods with an expiry date or best before date
• accept a reduction in the agreed price in return for payment before the due date
• require additional in-kind performance upon delivery or acceptance of goods
• transfer sanctions imposed by a controlling authority to the other party with no legal justification for doing so
• terminate a contract for repeated performance without notice or justification
• transfer a receivable without the debtor being able to provide written reasons for non-payment
• exclude the other party from being entitled to default interest when its own financial performance is delayed
• reduce the price for delivered goods from that already agreed with the supplier without a written agreement setting out the grounds and scope of any price cut

Law: Act providing for inappropriate terms and conditions of business relations and amendment to Act no. 30/1992 Coll. on Slovak Agricultural and Food Chamber