Act XCV of 2009 on the prohibition of unfair distributor conduct vis-à-vis suppliers regarding agricultural and food industry products With consideration to the importance of mutual trust and cooperation among the organisations involved in the production and processing of food constituting an integral part of the Hungarian food product path and in food trade, who are the participants of the food supply chain, and to promote the resolution of market disputes and the enforcement of ethical business standards, to ensure balanced positions for all participants in market negotiations, to maintain the safety of food supply and to keep consumers trust, the Parliament hereby adopts the following Act: General provisions Section 1 This Act aims to provide for fair business conduct among the organisations trading in agricultural and food industry products and their suppliers. (1) This Act applies to Section 2 a) legal entities, business associations without a legal personality and other economic entities, individuals (including primary producers, private entrepreneurs and family farms) involved in the production and processing of agricultural and food industry products, as well as producers and producer groups specified in a separate law; b) legal entities, business associations without a legal personality and other economic entities, individuals that redistribute agricultural and food industry products without transformation (processing) or sell such products to end customers, including organisations affiliated to the former as per Act C of 2000 on Accounting (hereinafter: Accounting Act) and third party collaborators that provide services related to the supply or sale of the said products to such persons or organisations in a direct business contact to the supplier of the products. (2) For the purposes of this Act: a) supplier shall mean any legal entity, business association without a legal personality and other economic entities or individuals involved in the production and processing of agricultural and food industry products, as well as producers and producer groups specified in the relevant legal act, that sell produced and processed products to traders;
2 b) distributor conduct shall mean any conduct, act or omission of the trader or any person or organisation acting for and on behalf of the trader in connection with the purchase or sale of the product; c) trader shall mean any legal entity, business association without a legal personality and other economic entity or individual, including organisations affiliated to the former as per the Accounting Act, and in the case of common purchase all the businesses constituting the purchase society, that sells the product purchased directly or indirectly from the supplier or resells it without transformation (processing) to the end customer for profit, as well as third party collaborators that provide services related to the supply or sale of the said products to such persons or organisations in a direct business contact to the supplier of the products; d) agricultural and food industry product: any product specified in Article 2 of Regulation (EC) 178/2002 of the European Parliament and the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety that can be sold to the end customer without further processing. Unfair distributor conduct Section 3 (1) Unfair distributor conduct is prohibited. (2) The following are regarded as unfair distributor conduct: a) the establishment of such conditions for the supplier as a result of which risk is shared in a way that provides unilateral benefits to the trader; b) the application of a contractual provision, not including obligations related to defective performance, stipulating the following with regard to the products delivered by the supplier to the trader: ba) the supplier s repurchase or retake obligation, or bb) repurchase or retake at a price reduced to an inappropriate extent in consideration of product characteristics or further usability by the supplier; c) the trader on its own or with the involvement of a third party collaborator transfers the costs serving the trader s business interests, in particular those related to business establishment, operation and functioning, to the supplier in part or in whole; d) the trader on its own or with the involvement of a third party collaborator charges the supplier a fee for becoming one of the trader s suppliers or for including or keeping its product in the trader s stock; e) the trader on its own or with the involvement of a third party collaborator charges the supplier a fee by any legal title ea) for service not actually provided; eb) for any activity performed by the trader that is unrelated to sale to the end customer and constitutes no added service for the supplier, in particular for the
3 placement of the product at a specified location in the trader s shop if it does not constitute an added service for the supplier; ec) requiring the use of or providing services not requested by the supplier and not serving its interests; ed) fees for services requested by the supplier and actually provided by the trader are also regarded as such if they are disproportionate; f) the requirement of a supplier contribution to a discount provided by the trader to the end customer for a period longer than the discount term, even if it is a partial contribution, or a supplier s contribution in excess of the discount rate provided to the end customer; g) if the costs resulting from sanctions imposed on the trader by authorities for any breach of law falling within the scope of the trader s operation are shifted onto the supplier; h) if the consideration for the product is paid to the supplier later than thirty days following takeover except for the case of defective performance; i) if a discount is required for the case that payment is effected within the set deadline; j) if the trader disclaims the applicability of late-payment interest, default penalty and other accessory contractual obligations ensuring performance; k) with the exception of products made under the trader s brand name, if an exclusive sale obligation is imposed on the trader without a proportionate consideration or if the application of the most advantageous conditions is required visà-vis the trader concerned relative to other traders; l) if a non-written contractual provision is applied between the trader and the supplier and it is not put into writing in spite of the supplier s relevant request within three business days thereof; m) if the trader places or changes an order with the supplier regarding the product without leaving a reasonable deadline; n) if the trader unilaterally amends the contract for an objectively unjustifiable reason that is not attributable to a circumstance regarded as external to the trader s operation; o) if the trader fails to publish the Business Rules mentioned in paragraph (5), deviates from the published Business Rules or applies a condition not contained therein; p) if the trader restricts the supplier s lawful trademark use. (3) Any contractual stipulation containing unfair distributor conduct or aiming to avoid a prohibition laid down in this Act shall be regarded as null and void. If the publication of the Business Rules mentioned in paragraph (5) is omitted, it shall not in itself result in the nullity of the provisions set forth therein. (4) The supplier may not validly consent to any unfair distributor conduct assumed against it.
4 (5) The trader shall publish the conditions applicable to the services to be provided by the trader to the supplier in connection with the distribution of the product in the form of Business Rules in accordance with paragraph (6) as general contractual terms and conditions and their updated version following any amendment in advance on its website, or if it does not have a website, in its premises open to the public. It shall also send them to the competent agricultural administrative authority. (6) The Business Rules mentioned in paragraph (5) shall contain the content of the services offered by the trader to the supplier, terms and conditions applicable to such services and the maximum service fee payable as well as conditions for inclusion into and exclusion from the scope of the trader s suppliers. (7) The obligation to draw up and to publish the Business Rules mentioned in paragraph (5) shall not apply to a trader whose net revenue calculated pursuant to section 6 (3) does not exceed twenty billion Hungarian forints in the preceding year. Procedural rules Section 4 (1) The agricultural administrative authority shall initiate a proceeding for the violation of the prohibition regarding unfair distributor conduct upon request or ex officio. No action may be taken pursuant to this Act, the pending action shall be terminated or the resolution imposing a sanction pursuant to this Act shall be cancelled if an action had been instituted against the trader concerned for misconduct as per section 7 of Act CLXIV of 2005 on Trade or for misconduct as per section 21 of Act LVII of 1996 on the Prohibition of Unfair Market Practices and the Restriction of Competition which ended in a judgment disadvantageous to the trader or in which an undertaking was made. The action initiated pursuant to this Act shall be suspended while the action for misconduct as per section 7 of Act CLXIV of 2005 on Trade or for misconduct as per section 21 of Act LVII of 1996 on the Prohibition of Unfair Market Practices and the Restriction of Competition is pending. (2) Action before the agricultural administrative authority shall be governed by the provisions of the Act on the General Rules of Administrative Procedures and Services. The case handling deadline is two months. In justified cases, the head of the authority may prolong this deadline on a single occasion with a further two months, simultaneously notifying the client thereabout. (3) In order to verify compliance with this Act and to find the evidence required for the clarification of the facts of the case, the public servant of the proceeding authority authorised to conduct on-site checks is entitled a) to enter the premises or facilities to be checked;
5 b) to study the documents and media under check or related thereto and to make copies or extracts in accordance with the separate laws on data protection and confidentiality; c) to take photos or make voice recordings on the site in order to document the proceeding; d) to open closed areas and enter closed premises, shops or business facilities even against the will of the persons staying there even if they also have residential purpose and to check means of transport and documentation. (4) The resolution made by the agricultural administrative authority in a proceeding pursuant to this Act may not be appealed against in an administrative proceeding. The involvement of interest representing organisations Section 5 (1) The professional organisation representing the interest of suppliers may assume the position of a client in any administrative proceeding initiated for the violation of this Act. (2) The procedural right granted in paragraph (1) is without prejudice to the supplier s right to enforce its claim against the violator. Sanctions applicable to the violation of the prohibition of unfair distributor conduct Section 6 (1) If the proceeding authority establishes that the trader assumes unfair distributor conduct, it shall impose a product path supervisory fine. (2) The minimum amount of the product path supervisory fine is one hundred thousand Hungarian forints, while its maximum amounts to five hundred million Hungarian forints; however, it may not exceed ten percent of the net revenue attained by the trader in the business year preceding the issue of the resolution that establishes the violation. (3) The net revenue shall be established on the basis of the consolidated net revenue included in the financial report or simplified financial report (hereinafter collectively: financial report) of the business year preceding the issue of the resolution that establishes the violation. If the trader s operation period up to that date is less than one year, the figures shall be considered in proportion to an annual level. If no credible information on the trader s net revenue attained in the business year preceding the issue of the resolution that establishes the violation is available, the fine shall be established on the basis of the net revenue attained in the last business year with an authentic closing. If the trader has no financial report yet, the business plan for the
6 year in which the proceeding is instituted shall be taken into consideration. If no such business plan is available, the net revenue reported by the trader upon request by the authority shall be considered, which is to be calculated according to the rules of the Accounting Act on making a preliminary balance, assuming that the commencement day of the proceeding is the accounting day. (4) If the trader assumes any repeated unfair distributor conduct within two years of the final resolution imposing the fine or of the approval of an undertaking, the amount of the product path supervisory fine may not be less than one and a half times the previously imposed fine and it must be no less than five hundred thousand Hungarian forints and no more than two billion Hungarian forints, at the same time, the upper limit remains ten percent of the net revenue attained by the trader in the business year preceding the resolution that establishes the violation. (5) Notwithstanding any proceeding pursuant to this Act, the injured supplier may enforce its claim based on the distributor s unfair conduct directly before court in a civil procedure. (6) No proceeding may be initiated pursuant to this Act once three years have elapsed following the occurrence of the distributor s infringing conduct. If the infringing conduct is an ongoing act, the deadline shall be calculated from the time when the conduct in question is terminated. If the infringing conduct is realised by the omission to eliminate a certain situation or condition, the deadline will not start to apply as long as the said situation or condition continues. The duration of an appeal proceeding shall not be considered for the calculation of the deadline. (7) The amount of the fine shall be established with due consideration to all relevant circumstances of the case, in particular the scope and severity of interest infringements, the duration and repetition of the infringement, the benefit attained as a result of the infringement and the trader s business size. (8) The name (company name) and address (registered office) of the trader that assumed unfair distributor conduct, the infringement established, the amount of fine imposed and, if the resolution is revoked, this fact, the fact that the judicial review proceeding has commenced, the content of the final judgment, and the resolution that makes the undertaking as per section 8 (1) obligatory shall be published by the agricultural administrative authority on its website and by the Minister responsible for agricultural policy in the Ministry s official gazette and on its website. The data shall be removed from the website two years after the final establishment of the violation and they cannot be published again following this date. Section 7 (1) The fine shall be paid within fifteen days of the communication of the resolution imposing the fine.
7 (2) If the fine is not paid, a late-payment surcharge shall be added to the amount imposed, the extent of which is specified in the Act on the General Rules of Administrative Procedures and Services. The fine and the late-payment surcharge shall be collected as taxes by the national tax authority upon the request of the authority that has imposed the fine. (3) If the obligor fails to pay the fine imposed on a legal person or a business association without a legal personality and it cannot be collected, the member or senior executive bearing indemnification obligation at the time of the infringement or the person bearing statutory responsibility for the obligations of the legal person or the business association without a legal personality shall be requested to pay the fine. (4) It is possible to order a precautionary measure to ensure the performance of the fine payment obligation. (5) The amount of the fine shall be paid to the account of the imposing authority and will be its own revenue. (6) With permission from the Minister responsible for agricultural policy, the amount of fine received by the agricultural administrative authority may be used for the protection of the end customers health and the interests of all participants in the food supply chain, for government tasks promoting the safe production and distribution of proper quality food and organised activity for the formation of conscious consumer behaviour only. Section 8 (1) If, prior to the adoption of a resolution by the agricultural administrative authority on the merits of the case, the trader affected undertakes in writing to align its conduct to the provisions of this Act in a set manner, and public interest can be served this way, the agricultural administrative authority may adopt an order that renders the performance of the undertaking obligatory, simultaneously terminating the proceeding, ordering the trader to pay the procedural costs, without including the establishment of infringement or non-infringement in the order. (2) Notwithstanding the issue of an order as per paragraph (1), if the circumstances of the case substantially change or the order is based on the misleading communication of a fact significant to the decision, a new proceeding may be initiated. In the new proceeding, a decision shall be made concerning the order issued previously pursuant to paragraph (1). (3) The agricultural administrative authority shall monitor the performance of the undertaking included in the order as per paragraph (1). The provisions of section 4 shall be applied to this monitoring examination as appropriate.
8 (4) If the trader affected has failed to perform the undertaking, the agricultural administrative authority shall impose a product fine in accordance with section 6 unless the changed circumstances render it unjustified to enforce the performance. In such a case, and if the trader has performed the undertaking, the monitoring examination will be terminated. Section 9 The agricultural administrative authority may prohibit the trader from applying a provision set out in the Business Rules as per section 3 (5) if its wording is ambiguous, the service or the consideration is not exactly defined or the fee charged by the trader is disproportionate to the costs. Closing provisions Section 10 (1) This Act shall enter into force as of 1 January 2010. (2) Any contractual stipulation in violation of this Act that has been made prior to the effective date of this Act and has not been performed up to that date shall lose effect on 1 February 2010. (3) The Government shall have a mandate to designate the agricultural administrative authority in a Decree. (4) The trader shall publish the Business Rules as per section 3 (5) by no later than 1 February 2010, and send it to the agricultural administrative authority. (5) The part on year 2009 in section 10 (2) of Act XVI of 2003 on the Agrarian Market Regulation shall be revoked.