A hub and spoke cartel (hereinafter referred to as “H&S”)[1] comprises a hybrid figure, blending elements of horizontal collusion and vertical restraints, with the intervention of at least three undertakings, one of which (the “hub”) operating at a different level of the value chain, upstream or downstream from the “spokes”, which compete in the same relevant product or service market. The horizontal element typically consists of a concerted practise[2], by which coordination is achieved without concluding any agreement and oftentimes without any sort of direct contact between the spokes. The vertical element, further developed bellow, generally assumes the form of RPM mechanisms, that may constitute a vertical restraint in of itself, but in these arrangements has an instrumental nature[3].
In the Portuguese Competition Authority’s (henceforth “PCA”) practical experience since 2017[4], the majority of these allegedly infringements have consisted of price setting behaviour between a common supplier that, via negotiations with food retailers, intermediates information flows between the spokes, thus reducing uncertainty about the competitors’ current and future market strategies and facilitating explicit or tacit horizontal collusion. Note that in the cases pursued by the PCA several retailers are parties to more than one case, while each supplier is party to only one case[5].
The complex nature of this infringement raises questions as to the requisite standard of proof for horizontal collusion. The ECJ’S VM Remonts[6] jurisprudence has concluded that a concerted practise may be attributed to the undertakings that were aware or could have reasonably foreseen that the information passed on to the hub was being transmitted to the spokes and accepted that risk (see also Anic, par. 87), full knowledge of the anticompetitive objective not being necessary[7].
In fact, the mere participation in a meeting[8] or the receiving of a message in a common platform’s inbox[9] are enough to give rise to a rebuttable presumption of knowledge of the practise, unless the undertaking expressly denounced it or took steps to distance itself from the collusion.
The PCA’s reasoning is in-line with ECJ’s case law. For example, all the decisions explicitly referred the ECJ’s judgement on the Anic Partecipazioni case[10], considering that heterogeneous patterns of conduct with the same anti-competitive object can constitute different manifestations of the same single and complex infringement of Article 101(1) TFEU, corresponding partly to an agreement and partly to a concerted practise.
The Nature of the Infringement and Market Conditions
The main principle of competition is that each undertaking determines independently its economic conduct on the relevant market[11]. Whilst, information exchanges in the context of vertical agreements maybe generally seen as pro-competitive[12], being necessary to improve the production or distribution of the contract goods or services, and benefiting from a block exemption under VBER[13], when the information is shared between competitors (via unilateral disclosure[14], a multilateral exchange[15] or by indirect means, via a platform, an algorithm[16] or common agency or supplier) it can lead to anti-competitive outcomes.
According to the Commission’s Guidelines[17], information exchanges on “commercially sensitive information” are considered per se restrictions, without needing to evaluate the market structure or its anti-competitive effects.
The Guidelines on Vertical Restraints also alert that RPM clauses may serve as a commitment device between undertakings to promote or maintain a horizontal price alignment, and even progressively raise it towards supercompetitive levels. The consequence is the reduction of intra-brand competition and the artificial enhancement of price transparency, thereby helping buyers reach or stabilise a collusive equilibrium and detecting when a party is deviating from the price benchmark[18], which can augment the efficacy of pre-existing anticompetitive agreements.
The economic effects of these practises depend on factors such as market transparency (e.g. in the food retail market, price variations are disseminated by means of publicity and public campaigns – making control of deviation more effective), demand elasticity (consumer behaviour is highly price-sensitive, which can make led to lower margins in price war situations, but also increases the incentive between firms for aligning their end price), market concentration, the exitance of barriers to entry and the complexity of the market (e.g. if the products exchanged are heterogeneous)[19].
The Underlying Rationale for H&S
The principal motivation for undertakings to participate in hub-and-spoke schemes could be in general to maintain intended margins on their products’ retail prices. The OECD, on its Background Notes to the Report on H&S practises[20], stated: «it’s a common situation for a supplier to hear retailers expressing concerns about low retails prices or margins (because of fierce intra-brand competition», this has been the case in the CAT’s Replica Kit case (infra developed) and the PCA’s Major Food Retailers cases[21]).
As the PCA noted in the Major Food Retailers cases, based on OECD’s and the Commission’s Guidelines, these practises tend to emerge in market structures where the retail market has high concentration ratios, and the retailers have considerable negotiating power[22] over the supplier. This circumstances leave the supplier with two options, when pressured to increase margins downstream: (i) either reduce the wholesale price at the cost of his own margin – which could be unsustainable, for example, if the supplier has multiple distribution contracts with MFC clauses; (ii) or promote stabilisation of retail prices through co-ordinated action, this can be achieved by implementing a network of resale price maintenance (RPM) clauses in its distribution contracts with retailers.
The development of case-law on H&S cartels
To the best of our knowledge, while the ECJ has not directly dwelled on hub-and-spoke collusions, with most refences being made en passant, in Advocate General’s opinions or in judgements, in most cases to exclude the application of the figure[23], its jurisprudence on concerted practises has been apparently used by the PCA, namely the Treuhand I, AC Treuhand II, Eturas and VM Remonts cases, considered similar to the major food retailers cases, insofar as an undertaking outside the relevant market (cartel facilitator) was sanctioned as part of a concerted practise for allegedly interchanging commercial information and helping achieve price harmonization.
To the best of our knowledge, the first jurisdictions to apply the concept have been the United States[24] and the United Kingdom[25]. The UK’s Office of Fair Trading (henceforth “OFC”[26]) has led the charge in H&S cartel enforcement, with the Replica Kit (JJB Sports) Toys (Argos) and Dairy (Tesco Stores) cases[27]. In the Replica Kit and Toys judgements, the Competition Appeal Tribunal (henceforth “CAT”) established the following legal test: (i) when a retailer (A) privately discloses to supplier (B) its future pricing intentions, (ii) must be reasonably foreseeable that B might make use of that information to influence market conditions and pass that commercially sensitive information to competing retailer (C); (iii) B then passes that pricing information to the competing retailer, which then goes on to use that information; (iv) even if A did not in fact foresee that possibility and/or if C did not appreciate the basis on which A had provided that information[28].
The standard of proof established by the CAT in the Replica Kit and Toys cases represents a more economical approach, focused on widening the protection of consumers and non-cartelized competitors, by facilitating the attribution of knowledge of the infringement to the targeted undertakings, even when direct proof of anti-competitive intent is not possible. However, this approach may constitute an additional burden for retailers when conducting their negotiations with suppliers, as they will have to consider if the information they provide will foreseeably be used in a hub-and-spoke arrangement – making the implementation of competition compliance programs even more important. As WHELAN[29] states, this approach may not be the most compatible with ECJ’s case-law, which, namely the Anic jurisprudence definition of concerted practises as «a form of collaboration between undertakings which, without having reach the stage of agreement (…), knowingly substitutes practical cooperation between them for the risk of competition». The question we should pose is whether the term knowingly implies that the knowledge must be actual or constructive.
Moreover, courts and competition authorities may recur to the presumption of causal connection established by the ECJ’ Judgements in T-Mobile Netherlands[30] and Hüls[31], by which, for the purposes of the application of Article 101(1) TFEU, in the context of a concerted practise and information exchanges, when one of the colluding undertakings remains active in the market after the collusion (meeting, discussions, etc.), it is presumed that it has taken into account the shared information and conformed its market conduct accordingly.
Conclusions
Hub-and-spoke agreements present several challenges, both for enforcers and for market players operating in distribution channels. Companies must be especially careful in their contacts with third parties, enacting effective compliance programs and avoiding disclosure of commercially sensitive information not directly related and necessary to the distribution agreement, as they can be potentially held responsible for information exchanges that can reasonably be used for anticompetitive purposes.
For enforcers, in the assessment of evidence in the absence of direct contact and the proof of intent, awareness and contribution to the anticompetitive practise, it is necessary to strike a balance between the effectiveness of competition law and protection of consumer welfare, on one side, with the right of targeted undertakings to rebut the Anic and T-Mobile presumptions, with the presumption of innocence and in dubio pro reu principles enshrined in articles 6, nº. 2 of the ECHR and 48, nº. 1 of the Charter of Fundamental Rights[32].
[2] The classical definition of concerted practise stems from the ICI v. Commission case (Case 48/69), also known as the Dyetuffs case, in which the Court defined it as “a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition”.
[4] We have identified circa 10 local cases resulting in sanctioning decisions, still pending final judicial decisions. Several major food retailers were sanctioned as spokes in all the identified cases. The hubs were in different relevant product markets, from alcoholic beverages, non-alcoholic beverages and juices, pre-packaged bread and substitutes and cakes, personal care products, and others. Most of the infractions had allegedly happen for more than one decade. The fines, for each case, have been in the range of tens of millions total.
[5] OECD, «Hub-and-spoke arrangements – Note by Portugal», par. 14
[6] Par. 29 and 31 of Judgement of 21 July 2016, Case- C-542/14.
[8] See the aforementioned Anic case, as well as Judgement of 7 January 2004, Aalborg Portland A/S, C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P e C-219/00 P, par. 80 et. seq., and the T-Mobile Netherlands case, C-8/08, par. 26.
[9] See Judgement from 21 January 2016, Eturas, C-74/14,
[10] See Judgment of the Court (Sixth Chamber) of 8 July 1999. Commission v Anic Partecipazioni SpA, C-49/92, paragraphs 112 et seq., and ICI v Commission, paragraph 64
[11] See Communication from the Commission, «Guidelines on the applicability of Article 101 of the TFEU to horizontal co-operation agreements». (2023/C 259/01), Chapter 6.
[12] Note that under article 4-a) of the Vertical Block Exemption Regulation, «the restriction of the buyer’s ability to determine its sale price», including the setting of a fixed or minimum sale price as the result of pressure rom, or incentives offered by, any of the parties, not only removes the vertical agreement from the block exemption, being subject to article 101(1) of TFEU, but constitutes a hardcore or object restriction.
[13] Commission Regulation (EU) 2022/720 of 10 May 2022 on the application of Article 101(3) TFEU.
[14] Comprising the situations in which one undertaking discloses commercially sensitive information, either out of its own initiative (with the other part at least accepting it, without publicly distancing itself from the disclosure), following a request or during a meeting, contact, or even by a public announcement.
[15] Paradigmatic examples include data sharing arrangements and other forms of collaboration that may emerge in R&D agreements, purchasing agreements and sustainability agreements.
In the Eturas case, the information was transmitted through the internal messaging system of an online booking platform, informing about an amendment to the platform terms and conditions.
[17] See paragraph 414 of the aforementioned Guidelines. These include exchanges about current and future pricing intentions, current and future production capacities, current and future commercial strategy, forecasts on current and future demand, etc.
[18] Paragraph 196 of C (2022) 3006, Communication from the Commission: Guidelines on vertical restraints
[19] See also judgement of 4 January 2020, Generics, C-307/18, paragraph 116 and, judgment of 11 September 2014, MasterCard and Others v Commission, C‑382/12 P, paragraph 165.
[23] See, for example, the Eturas case (C-74/14), in which AG Szupnar noted the concerted practise did not resemble hub-and-spoke collusion, stating that «such indirect exchange calls for additional consideration as to the state of mind of the parties involved, since the disclosure of sensitive market information between a distributor and its supplier may be considered a legitimate commercial practise» or in the case Associación Profissional Elite Taxi v Uber Systems Spain, SL opinion, that alerted «classifying Uber as a platform which groups together independent service providers may raise questions from the standpoint of competition law», insofar as the common platform might give rise to hub-and-spokes conspiracy concerns when the power of the platform increases».
[24] See, for example, Interstate Circuit v. United States,306U.S.208 (1939).
[25] PAIS, Sofia Oliveria, «Hub-and-Spoke Agreements and Tacit Collusion: Recent National Decisions and the Competition Market Authority Paper on Algorithms, Competition, and Consumer Harm», p. 174
[26] Now the Competition and Markets Authority (CMA).
[27] See [2004] CAT 17 (Replica Kit); [2005] CAT 13 (Toys); and [2012] CAT 31 (Dairy).
[28] See paragraphs 91 and 104 of the Replica Kit’s Judgement.
[29] WHELAN, Peter, Trading Negotiations Between Retailers and Suppliers: A Fertile Ground for Anti-Competitive Horizontal Information Exchange’, European Competition Journal, v. 5, n. 3, 2009, Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3084756.
[30] Judgement of the Court (Third Chamber) of 4 June 2009, T-Mobile Netherlands BV, KPN Mobile NV et. al., Case C-8/08, paragraphs 5, 6, 61 and 62.
[31] Judgement Hüls v Commission [1999], Case C-199/92
[32] For more information on the potential issues emerging from the application of the ECJ’s concerted practises jurisprudence to hub-and-spoke cartels, see POÇAS, João Miranda, Op. cit.
The abuse of significant market power is a special area regulated by the Hungarian Trade Act. Pursuant to Section 7 of the Trade Act the Hungarian Competition Authority (GVH) shall act in cases of abuse of suppliers by traders with significant market power by applying the provisions applicable to violations under Competition Act.
The Trade Act prohibits the abuse of significant market power against suppliers. Significant market power differs from the concept of dominant market position under the competition laws and is deemed to be established if the consolidated net revenues generated by a group from trading activities for the preceding year exceeds HUF 100 billion (approximately EUR 261 million) or if it enjoys or is likely to enjoy a one-sided bargaining position in connection with a supplier. Under the Trade Act, abusive practices include undue discrimination, unjustified contract modification, undue restriction of access to marketing channels, imposing unfair conditions, and applying unjustified charges.
These rules of the Trade Act cannot be invoked in relation to agricultural and food products, as a dedicated Act has been enacted for these cases, the enforcement of which falls under the competence of the National Food Chain Safety Office (NÉBIH).
In 2020, the Trade Act introduced new requirements for agreements between beverage manufacturers with significant market power and the HoReCa (hotels, restaurants, cafes) units they contract with. The violation of these rules falls under the jurisdiction of the GVH.
Retail chains in focus
In the recent years, the GVH has investigated several cases of abuse of significant market power, finding that big international retail chains (Spar and Auchan) had committed infringements. In case of Auchan, the GVH found in its investigation in 2015 that it had violated the Trade Act by requiring around three quarters of its suppliers of non-food products to pay a post-trade discount subsidy, regardless of turnover, in order to allow their products to be included in Auchan’s stock. The GVH investigations revealed that most of Spar’s non-food suppliers and several of Auchan’s had to pay a rebate at the end of the year, which was calculated as a percentage of the goods purchased by the retail chain that year.
The case reached the highest judicial body in Hungary – the Curia, which upheld the decision of the GVH, imposing a fine of HUF 1,61 billion, a record amount at the time. Spar had earlier been subject to similar investigations on several occasions: for example, in 2012 the GVH imposed a HUF 50 million fine on Spar for the ex-post supplier fee applied by the company between 2009 and 2011.
Spar fails to learn from the past: results in a package of measures amounting to HUF 1.7 billion
In its February 2025 statement, the GVH recalls that in December 2020, a new investigation started against Spar on suspicion of abuse of significant market power. In the process, the GVH concluded that the retail chain’s bonus scheme unilaterally and unjustifiably imposed fees on suppliers to get their products on the shelves of the store network. The GVH not only found an infringement, but also imposed a HUF 1.7 billion package of measures on the company as a result of the procedure, in respect of and without a fine.
As a result, Spar had to make a number of commitments, such as establishing six regional supply centres (Győr, Hódmezővásárhely, Nyíregyháza, Pécs, Székesfehérvár, Zalaegerszeg) to increase the sales opportunities for Hungarian small-scale local suppliers. Spar also committed that the regional scheme will provide 90% of opportunities for new micro, small and medium-sized suppliers. The commitments eventually included providing training to suppliers in quality auditing, logistics, warehousing and marketing. This package could have been quite beneficial for both Spar and its suppliers as Spar could avoid a fine, while suppliers could have job opportunities and other possibilities.
The implementation of the measures has enabled 100 new local small suppliers to benefit from sales opportunities and marketing support, and the proportion of new suppliers has exceeded the 90% minimum required by the commitment. In addition, Spar also created 23 new jobs linked to its regional supply centres. However, compliance was not full: the GVH found that Spar had not fully complied with its commitments for 2022 and 2023.
Takeaways
It is clear from the present case that the GVH is actively and thoroughly investigating the abuse of significant market power under the Hungarian law, and is ready to impose large fines or to order the implementation of substantial packages of measures. In addition, even if a package of measures is fulfilled, the GVH is actively investigating its proper execution. In the event of non-compliance or failure to provide proof, the GVH may impose significant fines on the businesses concerned.
Whereas the trend was to ensure legal privilege with the enactment of Law n°2021-1779 on Confidence in the judiciary, the French Supreme Court has adopted a strict interpretation of attorney-client privilege in the context of antitrust investigations leading to a harsh restriction of the scope of protected documents.
Indeed, this law has introduced at the article 56-1-1 of the French Criminal Procedure Code, a provision allowing individuals under a criminal dawn raid to raise an objection if they believe that documents being seized are covered by attorney-client privilege. In that case, the documents shall be placed under seal, subject of an independent report and subsequently forwarded to the liberty and detention judge, in charge to decide whether or not the documents can be joined to the files or must be returned.
In a judgement dated 24 September 2024, the Criminal Division of the French Supreme Court (‘Cour de Cassation’) ruled that conversations and documents exchanged between a lawyer and his client may be seized during an antitrust dawn-raids, if they do not fall within the scope of “the exercise of the rights of defense”.
In this case, the liberty and detention judge authorized dawn-raids, under the provision of article L.450-4 of the French Commercial Code during which digital and paper documents belonging to a company were seized by the DREETS (Direction régionale de l’économie, de l’emploi, du travail et des solidarités).
The company challenged the seizure of those documents before the First President of the Versailles Court of appeal, arguing that they were covered by the attorney-client privilege. As the Court of Appeal dismissed its action, the company brought the case to the Cour de Cassation. In its judgement, the Cour de cassation confirmed the ruling of the First President of the Versailles Court of Appeal and rejected the company’s claims.
First, the Cour de cassation explained that although all documents exchanged between attorney and client were covered by legal privilege, it was nonetheless possible to seize them in the course of a dawn-raid conducted under the provision of article L.450-4 of the French Commercial Code, i.e investigations regarding anti-competitive practices, as long as those documents do not fall within the scope of “the exercise of the rights of defense”.
Second, as the company argued that the DREETS had failed to apply the specific procedure laid down by article 56-1-1 of the French Procedure Criminal Code, introduced by the Law no. 2021-1729 on confidence in the judiciary, the Court ruled that this procedure was not applicable to a dawn-raid conducted in competition law matters but limited to criminal dawn-raids.
Third, the Cour de cassation dismissed the company’s argument that the judge had failed in his duty by not sorting out the documents that were subject to the exercise of the rights of defense among all the documents selected. The Court ruled that, in case of a dispute over the nature of the items seized, it is up to the company to identify precisely which privileged documents fall within the scope of “the exercise of the rights of the defense”.
The position of the French supreme court is particularly significant as it seems to be inconsistent with the judgement adopted by the Court of Justice of the European Union (CJEU) on 26 September 2024. Indeed, the CJEU ruled in favor of a broader scope of attorney-client privilege asserting that this protection, guaranteed by article 7 of the Charter of Fundamental rights, is fundamental to the right to a fair trial and must be respected in all legal proceedings. The CJEU stated that legal advice provided by a lawyer in matters of company law is covered by attorney-client privilege: as a consequence, any decision requiring a lawyer to disclose all related documentation and information relating to his or her relations with his or her client, concerning such legal advice to the authorities would interfere with the right to confidentiality between them. It stems from the above that this protection covers not only documents that fall within the scope of the “exercise of the rights of defense” but also legal consultations.
We can only hope that, in line with this reasoning, the position of the Cour de cassation will evolve in order to ensure a more effective right of defense of the companies visited. Indeed, this approach is really detrimental as Attorneys, when drafting a legal consultation, have to bear in mind the risk of this consultation to be seized by the competition authorities.
The Danish Act on Unfair Food Practices (“The UTP Act”) came into force on 1 July 2021, implementing the EU UTP Directive (2019/633). The aim is to regulate unfair trading practices in relations between businesses in the agricultural and food supply sector. Under the UTP Act, some trading practices are always prohibited (the black list), while other trading practices are prohibited unless the parties have entered a clear and unambiguous agreement (the grey list).
Evaluation of the UTP Act: Focus areas and approach
The Danish Competition and Consumer Authority monitors the effects of the UTP Act and came with their first evaluation in November 2024.
The evaluation focusses on six areas:
The impact on the competitiveness of Danish suppliers
Risk of smaller suppliers not being selected
The development of consumer prices
Unwanted effects on rural areas and local areas
The potential effect for companies to use credit facilitation
The evaluation is based on questionnaires sent to relevant companies, interviews and ongoing dialogue with business organizations and analysis of relevant figures and data.
Status on UTP in Denmark
The evaluation only shows limited signs of unfair trading practices. The reason is that companies have largely adapted their business practices to the rules in the UTP Act. When challenges do arise, suppliers, buyers and business organizations mostly handle disagreements through dialogue rather than formal complaints.
Based on the results of its monitoring and evaluation of the UTP Act, the authority concludes that the UTP Act adequately fulfils the purpose of the underlying UTP Directive.
Only one UTP complaint
Since the law came into force on 1 July 2021, the authority have only received one complaint concerning a violation of the UTP Act. The complaint was later withdrawn. Therefore, no decisions have yet been passed on unfair trading practices.
UTP in Denmark: Always room for improvement
Although there has only been one complaint, there is room for improvement. This is the opinion of several business organizations, which especially highlight three types of trading practices where companies are experiencing challenges:
Suppliers are charged for services or conditions that are not directly related to the sale of agricultural and food products.
Buyers make unilateral changes to the supply agreement.
Suppliers are required to cover deterioration or loss, even if the deterioration or loss is due to the buyer’s negligence or fault.
Foreign direct investment contributes to the growth of the economies where foreign money is invested, but can also undesirably interfere with resources of strategic importance to the functioning of the host country. In difficult times, security issues come to the fore at the national and EU levels, and protectionist tendencies rise. In recent years, the best example is implementation of regulations on control of FDI in the laws of various European countries (as reflected in the latest update to the procedural guidelines issued by the Polish competition authority).
In recent years, additional mechanisms have been introduced to protect European economies and markets from undesirable foreign investments (as we discussed in the article “Control of concentration of undertakings receiving foreign subsidies: New powers of the European Commission”), in response to economic expansion by some countries and investors. Primarily, this has to do with the leading contemporary totalitarian power, the People’s Republic of China (and the quasi-totalitarian Russian Federation). They take advantage of the opportunities provided by the functioning of the free market to expand their influence around the world, particularly in European countries with developed market economies. Investors from such countries have sought to take control of companies, technologies or assets of vital national security importance in European jurisdictions. Frequently, such investments have proved successful for dubious investors, to the obvious detriment of host states. But the controls also protect European economies from competition from other highly developed countries and companies from those countries.
The increasingly uncertain international situation has also undoubtedly contributed to the rapid development of these regulations. The immediate catalyst was the Covid-19 epidemic, which originated in China and affected the functioning of the global economy and national economies on a scale not seen in decades; and from 2000 onward, Russia’s increasingly aggressive policy toward its neighbours, culminating in its full-scale invasion of Ukraine in 2022 and the war now underway just across the European Union’s eastern border.
In this article, I compare legal solutions for control of FDI in selected EU countries and the UK. For this analysis, the main source of data was a multi-jurisdictional study on FDI regulations prepared for the Antitrust Alliance, an international organisation of independent law firms practising in the competition area (including Wardyński & Partners).
Development of FDI regulations in EU member states
State control of inbound foreign investment has a long tradition in European countries. Protectionist measures have been introduced with varying degrees of intensity depending on the socio-economic and political situation. The possibility of monitoring the influence of foreign capital within a country and blocking certain investments due to the interests of the host country is an emanation of the sovereignty of each country.
However, control of foreign investment is also driven by a conflict of values evident especially in states with a market economy model based on free competition mechanisms (including competition by foreign capital). In addition to the free market, countries must also take into account other objectives and values vital to their functioning and the well-being of their citizens. Primarily, such values protected and guaranteed by the state are security and public order in the broadest sense, but also protection of competition, consumers, social rights, and the environment. (For example, Art. 31(3) of the Polish Constitution allows limits to be imposed on the exercise of constitutional rights and freedoms “only when necessary in a democratic state for the protection of its security or public order, or to protect the natural environment, health or public morals, or the freedoms and rights of other persons.”) Implementation of these objectives and values requires a departure from the market paradigm.
We also face an identical conflict of values at the EU level. While the Maastricht Treaty of 1992 recognised the free movement of capital as a Treaty freedom, the freedoms of the EU internal market are not absolute. Under the EU treaties, these freedoms can be restricted (by the EU or member states) in particular when justified by the public interest (e.g. Art. 36 and 52 TFEU).
And it is important to note the specific position of member states operating within the international structure of the EU, to which member states have delegated some of their sovereign powers. In this structured economic and political organism, there are two tiers of regulation—in addition to national laws, there are also EU provisions applicable to the entire community of member states.
Individual countries have applied legal mechanisms to control foreign investments as diverse as the purposes they are intended to serve. In particular, these are solutions to control the movement of capital, the transfer of companies across national borders, or cross-border mergers of companies, in the broader public interest. Generally, in the first decades of the EU’s existence, national solutions included narrow sectoral regulations. Restrictions were imposed for example on foreigners wishing to purchase real estate, invest in media companies (particularly print and television), purchase energy assets, or operate or invest in the telecommunications or defence sectors (in Poland, see for example the Act on Acquisition of Real Estate by Foreigners; Art. 40a of the Broadcasting Act; Act on Special Powers of the Minister for Energy of 18 March 2010; and the preamble to the Act on Control of Certain Investments of 24 July 2015). For a while, a common solution was the “golden share,” a mechanism allowing the state to retain control over strategic companies undergoing privatisation.
The situation began to change several years ago under the influence of the international situation, which forced further legislative steps to tighten FDI controls. The EU and national legislatures began taking a more comprehensive and restrictive approach to these controls. Uniform multi-sectoral regulations were introduced (generally in addition to existing sectoral regulations), typically for a specific but fairly broad group of sectors considered strategic for the functioning of the state.
The impetus for introduction of new national solutions was adoption of the EU’s comprehensive FDI Screening Regulation (Regulation (EU) 2019/452 of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, which entered into force in April 2019). The majority of EU member states introduced comprehensive national FDI solutions in 2020–2021. (Regulation 2019/452 does not require member states to create national FDI screening mechanisms, but if they do, under Art. 3 of the regulation they must ensure that their controls have specific timeframes, are transparent and non-discriminatory, introduce procedures for recourse against national decisions on FDI control, and provide measures to prevent circumvention of FDI control mechanisms and related decisions.) Instead, the regulation introduced a mechanism for cooperation and information exchange between the European Commission and national authorities overseeing the investment control process in individual member states. (Regulation 2019/452 introduces a cooperation mechanism for foreign investments subject to screening in EU member states (Art. 6) and foreign investments not covered by screening (Art. 7). The principle of mutual cooperation between the European Commission and the member states within these mechanisms allows for protection of common interests. The Commission is the coordinating and initiating body for these interactions.)
Pursuant to the Commission’s latest FDI report (Fourth Annual Report on the screening of foreign direct investment into the Union, issued in October 2024), 23 of the 27 EU member states have adopted or updated cross-sectoral FDI control regulations (mainly between 2020 and 2023). New foreign investment control mechanisms were adopted in Belgium, Bulgaria, Estonia, Ireland, Luxembourg, Romania, Slovakia and Sweden, while the solutions already in place in Denmark, France, Germany, Hungary, Italy, Latvia, the Netherlands, Poland, Slovenia and Spain were updated. A cross-sectoral regulation was adopted before 2017 only in Portugal, and in three jurisdictions (Croatia, Cyprus and Greece) the legislative process for adopting analogous provisions was underway.
Comparison of current FDI regulations in selected jurisdictions
In this article, we examine the impact of these regimes on both active and passive stakeholders, i.e. the foreign investor and the entities protected by FDI provisions.
Entities are generally protected because of:
The subject of their business (protected industries)
Ownership of certain assets (e.g. critical infrastructure)
Generating certain levels of turnover, above the de minimis exemption for FDI control in the given jurisdiction.
Clear, understandable provisions and easily verifiable criteria should help foreign investors evaluate planned transactions in light of the obligations imposed by FDI provisions, encouraging legal certainty and thus reducing investment risk.
A comparative analysis of the scope of these concepts across 16 jurisdictions (selected EU member states and the UK) is presented below. This sample reveals certain regularities found in legislation across various countries with developed market economies.
Active entities: Foreign investors
The table below compares the definitions of a “foreign investor” in 16 jurisdictions in terms of:
Categories of entities included in the concept of “foreign investor”
Geographic origin of the investor (how “third countries” are defined, and by implication, when an investor is regarded as “domestic” for purposes of FDI controls)
Whether transactions carried out via a domestic entity (or entities from jurisdictions that do not trigger FDI controls) are counted as domestic investments (i.e. not subject to heightened state control), or as FDI potentially subject to control.
Foreign investor test
Country
Entities covered
Origin of foreign investor
Does the state control indirect investments? (via a domestic entity or from a permitted territory influenced by a third-country entity)
Belgium
Natural person or undertaking from a third country, as well as foreign institutions, public entities and third-country governments
Entities from outside the EU
YES
It is sufficient that one of the investor’s beneficial owners resides in or has its registered office in a country outside the EU
Czechia
Natural or legal persons from a third country
Entities from outside the EU
YES
It is enough to exercise indirect ownership control from outside the EU
Denmark
Natural persons and undertakings from a third country (and in the case of investments in the North Sea, any investor regardless of legal form)
Entities from outside the EU + EFTA
(in the case of investments in the North Sea, any investor)
YES
It is enough to exercise indirect ownership control from outside the EU or the EFTA
Estonia
Natural or legal persons from a third country
Entities from outside the EU (including holding citizenship of a third country [including dual citizens] or stateless persons)
YES
It is enough to exercise indirect ownership control from outside the EU
Finland
Natural persons, organisations (including undertakings) and foundations from a third country
Entities from outside the EU + EFTA
(for investments in the defence sector, all entities from outside Finland)
YES
It is enough to exercise indirect ownership control from outside the EU or the EFTA
France
Any third-country entity
Entities from outside France (non-domestic)
(Additionally, French entities residing or registered outside France for tax purposes)
YES
Any “link” from outside France in the total ownership chain of a foreign investor is enough
Germany
Any third-country entity
Entities from outside the EU (although certain intra-EU transactions are subject to FDI control)
YES
It is enough to exercise indirect ownership control from outside the EU
Hungary
Third-country entities (natural and legal persons)
Entities from outside Hungary (when the investment relates to acquisition of full control and exceeds the indicated investment value threshold)
Entities from outside the EU + EEA + Switzerland (other investments)
YES
Latvia
No definition of foreign investor—any investor meeting the investment control criteria indicated in the national FDI regulation (e.g. partnerships, companies, associations and foundations)
Any entity, both domestic and foreign
In the case of purely financial transactions (e.g. credit), entities from outside the EU, the EFTA, NATO or the OECD are considered foreign investors
YES
It is sufficient that one of the investor’s beneficial owners resides or has a registered office outside Latvia (or its origin is not certain)
Lithuania
Natural or legal persons or organisations from a third country
Entities from outside of Lithuania (non-domestic)
Two categories of investors:
A “foreign investor” is an entity residing or registered in the EU, the EFTA, NATO or the OECD
A “third-country investor” is an entity residing or registered in a third country—or in the EU, EFTA, NATO or the OECD if at least ¼ of the voting power in their governing bodies is held by entities from outside those jurisdictions
YES
It is enough to exercise indirect ownership control from outside Lithuania
Netherlands
Any entity, whether foreign or domestic
Any entity, whether foreign or domestic (with certain exemptions for the Dutch Treasury, provinces, communes and other Dutch public institutions)
YES
Poland
Third-country entities (natural and legal persons)
Entities from outside the EU, the EEA and the OECD
(although certain transactions involving specifically identified Polish strategic companies are subject to FDI control regardless of the purchaser’s country of origin, including Poland)
YES
It is enough to exercise indirect ownership control from outside the EU, the EEA or the OECD
Portugal
Third-country entities (natural and legal persons)
Entities from outside the EU or the EEA
YES
It is enough to exercise indirect ownership control from outside the EU or the EEA
Spain
Third-country residents (natural and legal persons)
Entities from outside the EU (in the case of Spanish public companies and companies valued above EUR 500 million, all entities from outside Spain, through 31 December 2024)
YES
It is sufficient that one of the investor’s beneficial owners resides or is registered outside the EU
Sweden
Third-country entities (natural and legal persons)
Entities from outside the EU
YES
It is enough to exercise indirect ownership control from outside the EU
United Kingdom
Any entity, foreign or domestic (natural and legal persons)
Any entity, foreign or domestic
YES
Analysis
The data show that the entities covered by the concept of a “foreign investor” are defined broadly and in a fairly similar manner in the analysed jurisdictions. The term generally encompasses all investors from third countries, both natural and legal persons (regardless of legal form, and thus not exclusively undertakings). As a rule, the determining factor for belonging to a given territory is citizenship or residence (for natural persons) or having a registered office (for legal persons) in that state.
By contrast, the geographic link for distinguishing between domestic and foreign investors (which territories are considered “domestic” and which are “foreign”) is defined in a much more varied way. This component of the definition of a foreign investor significantly affects the determination of whether a foreign investment should be reported to domestic control authorities.
In this aspect, the following ways of defining the concept of foreign investor can be distinguished in the analysed jurisdictions:
The broadest definition (covering the largest range of potential investors) was introduced in the Netherlands and the UK. Pursuant to the FDI control provisions in these jurisdictions, any entity, whether foreign or domestic (Dutch or British, respectively) is considered a foreign investor.
A traditional definition (slightly narrower than the one above) applies in France. Indeed, entities from all other countries except France are considered foreign investors. Interestingly, French entities residing or registered outside of France for tax purposes are also considered foreign investors.
Some definitions recognise as “domestic” territory other countries belonging to a single supranational organisation. In six of the surveyed jurisdictions, entities from outside the EU are considered foreign investors (Belgium, Czechia, Estonia, Germany, Spain and Sweden). In three jurisdictions, the “domestic” area includes, in addition to the EU, other countries in the European Economic Area (i.e. Liechtenstein, Norway and Iceland), and in the case of Denmark (in principle) and Finland, also Switzerland (member states of the EU + the European Free Trade Association). Poland stands out in this group of states, as the geographic connector for defining a domestic investor is expanded the most—in addition to EU and EEA countries, it also includes OECD member states (the UK, Switzerland and eight non-European countries—the Organization for Economic Cooperation and Development comprises 30 countries, of which Australia, Canada, Japan, Mexico, New Zealand, South Korea, Turkey and the US are not members of the EU or the EEA). A contrario, entities from outside the OECD are considered foreign investors. Thus from this perspective, Polish laws defines a foreign investor in the most limited way among the jurisdictions identified here. As 10 of these 16 jurisdictions (including, as an extreme case, Poland) use a similar method of defining the origin of a foreign investor (generally outside the EU, the EEA or the EFTA), this is something of a standard in these jurisdictions.
Mixed definitions, combining the classic definition (point 1) and definitions narrowing the concept of a foreign investor to entities originating from outside countries affiliated with one or more international organisations (point 3). We encounter such cases with Lithuania and Hungary, where two categories of foreign investors were introduced. In Lithuania, there is a group of “closer” foreign investors (i.e. from outside Lithuania, but from the EU, the EFTA, NATO or the OECD) and third-country investors, i.e. “further” foreign investors from states not affiliated with these organisations (and this category is treated more rigorously in the Lithuanian FDI control provisions than the category of foreign investors in the strict sense). In Hungary, entities from outside that country are considered foreign investors for the most significant investments (transactions involving acquisition of control and investments exceeding de minimis thresholds), and for other investments subject to oversight, only investors from outside the EU, the EEA or Switzerland are considered foreign investors.
In all the analysed national provisions, the principle was introduced to extend FDI control to transactions formally carried out by domestic entities, but over which decisive influence (directly or indirectly) is exercised by entities qualified as foreign investors (indirect investments). In determining whether the activity of direct investors is influenced by third parties, evaluation criteria are used deriving from notions commonly applied in antitrust, trade or tax law, such as control, dominance, or beneficial ownership. Such provisions are intended to prevent foreign investors from circumventing FDI controls.
Protected entities and protected activities (strategic sectors for state security)
The table below describes the protected entities in each country (i.e. those with special status for protecting state interests). Additional determinants for protected entities are:
Carrying out certain activities (in sectors of particular importance to state security)
The de minimis threshold for foreign investments
Whether investments involving only acquisition of assets from protected entities are subject to FDI control.
Protected entity test
Country
Entities covered
Scope of business (strategic sectors for state security)
Required annual turnover or transaction value (de minimis thresholds)
Asset deals (critical infrastructure)
Belgium
Undertakings registered in Belgium in a strategic sector
YES
YES
EUR 100 million (total annual turnover—applies to the most sensitive strategic sectors)
EUR 25 million (total annual turnover—less-sensitive strategic sectors)
YES
Czechia
Undertakings conducting activity in Czechia in a strategic sector
YES
NO
YES
Denmark
Entities registered in Denmark in a strategic sector
YES
NO
Only in the case of creation of a new entity, financial agreement or capital investment, the value of the investment must exceed DKK 75 million
YES
Estonia
Undertakings conducting activity in Estonia in a strategic sector
YES
NO
Only in the case of the media sector, the required annual turnover threshold in Estonia is above EUR 3 million
YES
Finland
Undertakings registered in Finland in a strategic sector
YES
NO
YES
France
French legal entities, registered in France in a strategic sector
YES
NO
YES
Germany
Undertakings registered in Germany in a strategic sector
YES
NO
YES
Hungary
Companies (public or private) registered in Hungary in a strategic sector. Additionally, entities specifically listed as companies of special strategic importance to the state
YES
NO
Only in the case of certain investments concerning specifically listed strategic companies and investments in public companies, the value of the investment must exceed HUF 350 million
YES
Latvia
Legal entities registered in Latvia (partnerships, companies, associations and foundations) in a strategic sector
YES
NO
Only in the case of credit or loans by foreign investors, the value of the investment must exceed 10% of the protected entity’s assets
YES
Lithuania
Public and private companies registered in Lithuania falling into one of three specified categories:
Companies wholly controlled, directly or indirectly, by the Treasury or local governments
Companies 2/3 controlled, directly or indirectly, by the Treasury or local governments
Other companies
YES
YES
The value of the transaction must exceed 10% of the protected entity’s annual revenue
(does not apply to transactions involving the nuclear energy sector)
YES
Netherlands
Undertakings with actual ties to the Netherlands (i.e. managed from the Netherlands or conducting activity in the Netherlands) in a strategic sector
YES
NO
YES
Poland
Undertakings registered in Poland in a strategic sector (including entities with assets classified as critical infrastructure and public companies).
Additionally, specifically listed companies strategic for state security
YES
YES
Annual turnover in Poland of more than EUR 10 million
(does not apply to specifically listed companies of strategic importance)
YES
Portugal
Entities (regardless of legal form) involved in strategic activities or holding assets in a strategic sector in Portugal
YES
NO
YES
Spain
Undertakings registered in Spain in a strategic sector
YES
YES
EUR 5 million (total annual turnover)
Additionally, for public companies listed in Spain, if the value of the company exceeds EUR 500 million
YES
Sweden
Undertakings registered in Sweden in a strategic sector
YES
NO
YES
United Kingdom
Entities other than natural persons (regardless of their legal status), registered in the UK or outside the UK but doing business in the UK or related to activity conducted in the UK (e.g. by supplying goods and services to the British market)
YES
NO
YES
Analysis
In the studied jurisdictions, protected entities are defined in two ways. In most jurisdictions (11 of 16), this concept refers exclusively to undertakings, or a certain subset of undertakings (e.g. companies). In five cases, a broader definition of protected entity was used, which can be any entity (regardless of whether it has the status of an undertaking in the given legal system) engaged in activity covered by investment protection (as a rule, this is a category of entities with legal personality). This is the case in Denmark, France, Latvia, Portugal and the UK.
A domestic entity is usually understood to mean an entity with its registered office in the host country (in 11 of 16 jurisdictions). By contrast, in five cases (Czechia, Estonia, the Netherlands, Portugal and the UK), any entity engaged in activity within protected sectors or holding assets within sectors deemed strategic in the given state is considered a protected entity.
Inherent in the definition of a protected entity is a determination that it operates in a sector strategic to state security. Here, two main trends can be noted.
On one hand, protected sectors may be defined by identifying them in detail (a closed list) and possibly specifying additional criteria that must be met. This is the approach, for example, in the current Polish act as amended in 2020, which lists more than 20 types of activities covered by FDI protection. It is similar in Latvia, where the different types of strategic activities are defined in great detail, introducing additional criteria (e.g. a threshold of installed energy capacity at electricity producers, the size of agricultural or forest holdings, or the length of a thermal network).
The second method of defining sectors is more general (less precise), covering a very wide range of activities. Such a broad definition leaves a lot of room for interpretation and discretion on the part of the authority. This is the approach for example in France (sectors considered sensitive for reasons of public safety and order, or with operations related to national defence) and in Finland (manufacturing and supply of key goods and services related to the statutory duties of state authorities and necessary for ensuring public order and security).
Regardless of the adopted method for defining strategic sectors, the scope of protected activity can be defined relatively narrowly by identifying only a few protected areas (e.g. in Czechia and Lithuania), or broadly (e.g. in Estonia, Hungary, Poland, Spain, Sweden and the UK). As a rule, protected activities are defined broadly. Despite the differences in indicating a number of strategic sectors for each state, there is a canon of activities considered sensitive to public security in all these jurisdictions, such as:
Cybersecurity (including software and digital technologies)
Another criterion for protected entities is the turnover generated by the entity (or its protected assets). Sometimes, instead of turnover, another financial criterion is used, e.g. the minimum value of the investment in protected goods. Such criteria set a de minimis threshold and were adopted in some jurisdictions to obviate controls of foreign investments of minor importance and negligible impact on state security.
The jurisdictional overview above shows that eight of the countries do not apply the de minimis construction at all, while another four (Denmark, Estonia, Hungary and Latvia) include such exemptions as an exception to the rule and only for selected branches.
Four jurisdictions establish a de minimis threshold as a rule. In the case of Belgium, two turnover thresholds are set for protected entities (EUR 100 million or EUR 25 million per year), depending on which strategic sectors are affected by the investment. Spain sets a standard threshold of EUR 5 million in annual turnover, while in the case of public companies listed in Spain, the company must have a value exceeding EUR 500 million to be subject to FDI scrutiny.
Only Poland has a set uniform annual turnover threshold for protected entities of EUR 10 million (except for a list of specific companies, currently 17, found in a government regulation to be of special importance to national security). Meanwhile, in Lithuania, the value of the foreign investment must exceed 10% of the protected entity’s annual revenue for the de minimis threshold to be exceeded (although this criterion does not apply to investments relating to nuclear energy).
All of the surveyed national FDI provisions indicate that foreign investments in assets (and relating to critical infrastructure) should be treated on a par with investment in protected entities (in all jurisdictions, without exception, share deals are subject to FDI control, in addition to asset deals). If asset deals were ignored, investment control regulations would not be very effective in ensuring public safety.
Summary: FDI control in Poland compared to other countries
According to the European Commission’s latest FDI Report, in 2023 a total of 1,808 foreign investment authorisation cases were processed in EU member states (both upon application and at the authority’s own initiative). Of these, 56% were subjected to formal review proceedings and 44% were found to be ineligible for consideration. For the vast majority of cases accepted for hearing (85%), unconditional approval was granted for the investment. This means that such transactions were approved without the need of any further action by the investors. In 10% of the cases, permission was granted subject to meeting conditions or applying mitigating measures. National FDI control authorities blocked transactions in only 1% of all cases in which decisions were issued. Additionally, 4% of applications were withdrawn by the investors before a decision was issued. In 2023, the main foreign investors in the EU27 were from the US (about 30%) and the UK (about 25%).
Against this background, what is the decision-making practice of the FDI control authority in Poland—the president of the Office of Competition and Consumer Protection (UOKiK)? (In the case of the specific companies listed as vital to national security, the Minister of State Assets and the Minister of National Defence are the control authorities.) From introduction of a comprehensive, cross-sector control mechanism in Poland in July 2020, through May 2024, UOKiK conducted 15 foreign investment control proceedings (according to an UOKiK communiqué of 9 May 2024). To date, the authority has not issued a single ban on conducting a foreign investment in Poland. In 2023 alone, UOKiK conducted four investment control proceedings, in which two cases resulted in issuance of a no-objection decision (UOKiK Activity Report for 2023).
In 2023, Poland accounted for only 0.2% of all cases covered by control proceedings within the EU27. However, the percentage of decisions issued by UOKiK on reported foreign investments was similar to the level for all decisions issued in FDI control cases in EU countries during this period. The very small number of control proceedings in Poland results directly from the definition of “foreign investor” and “protected entity” in the Act on Control of Certain Investments.
Against the backdrop of other European solutions, the Polish provisions stand out in several areas. First, the Polish definition of a foreign investor is the most liberal of all the national solutions analysed here. The Polish act excludes the most countries of origin of investments as not subject to FDI control. Investments originating from such countries are effectively equated with domestic investments. Unlike the other analysed jurisdictions, FDI control in Poland does not cover investors from, for example, the UK or Turkey, or, from outside developed countries in Europe, investors from Australia, Canada, Japan, South Korea, or the US. Lithuania applies solutions somewhat similar to those in Poland. At the other extreme are regulations (e.g. in the Netherlands and the UK) recognising as a foreign investor, in principle, all entities, regardless of whether they originate from the host country or from abroad.
Second, the Polish provisions recognise as protected entities only undertakings operating in protected sectors (much like the solutions adopted in most of the analysed jurisdictions, apart from Denmark, France, Latvia, Portugal and the UK).
However, a de minimis threshold is included in the Polish act, exempting an investment from notification if the protected entity does not reach an annual turnover of more than EUR 10 million in Poland. This de mininis exemption means that by definition, a significant number of transactions are not monitored by UOKiK. On one hand, this limits the investment control to significant transactions that could have an obvious impact on national security, but on the other hand, FDI control may not extend to a number of important investments, e.g. involving startups introducing new technologies or innovations that could have a significant impact on security in many sectors.
Upcoming changes: Proposal for a new EU regulation on FDI screening and its impact on the existing FDI arrangements of member states
The foregoing analysis confirms that currently EU member states have considerable freedom in introducing and applying their own policies and regulations through which they can control and restrict foreign investments they deem undesirable. But this freedom is diminishing with continuing EU integration and assumption by EU bodies of more and more of the individual competencies of member states. This process is also underway in the area of FDI controls, as the European Commission has issued a proposed regulation establishing a new framework for the EU’s foreign investment control system (the proposal of 24 January 2024 is at the legislative stage of first reading in the European Parliament).
The proposal would change the Commission’s existing approach to national FDI control systems. First, it would oblige all EU member states to maintain their own foreign investment control systems. Second, it introduces minimum standards common to the entire EU (resulting in unification of mandatory FDI control mechanisms at the level of the member states). Such changes will have to be introduced by member states within 15 months after the new EU regulation comes into force.
The planned EU regulation would introduce mandatory standards for the concepts discussed in this article, i.e. who is regarded as a foreign investor and which entities and sectors are protected.
With regard to the origin of foreign investors, investment control at the national level will be extended to investments by all entities originating from outside the EU. This means that unlike the current Polish system (investors from outside the OECD), the new national provisions will also have to apply to investments originating from countries such as Canada, Norway, South Korea, Switzerland, the UK or the US.
In terms of protected entities and sectors, member states will be required to extend investment control to such areas as advanced semiconductors, artificial intelligence, biotech, quantum technologies, advanced sensory and robotic technologies, energy technologies, as well as certain activities key to the functioning of the EU financial system. (A detailed list of technologies, assets, plants, facilities, equipment, networks, systems, services and economic activities of particular importance to security or public order of the Union is set forth in Annex II to the proposed regulation.) For this reason, Polish lawmakers will need to revise and expand the current catalogue of protected economic sectors.
Consequently, there will soon be changes in the control of foreign investments at the EU level and in member states, including Poland (perhaps this year, and certainly in 2026, as the current provisions on cross-sectoral controls remain in effect until 24 July 2025, under a Covid-19 relief act from 19 June 2020). The number of FDI applications processed by UOKiK is expected to increase significantly.
Andrzej Madała, Competition & Consumer Protection practice, Wardyński & Partners
Last year 2023, the Swedish Competition Authority (”the SCA”) conducted a major investigation into unfair trading practices, which resulted in several cases. Here is a summary of the most interesting case handled by the SCA so far.
Overview on unfair trading practices (in sweden)
The Swedish Act (2021:579) on the Prohibition of Unfair Trading Practices in the Purchase of Agricultural and Food Products (“LOH”) entered into force on 1 November 2021. The Act is based on UTP Directive.[1] The Directive sets a minimum level of protection against certain trading practices and contractual arrangements.
The Directive is based on the premise that imbalances in bargaining power between suppliers and buyers of agricultural and food products are common – which is the reason for legislative protection against the stronger trading partner.
Two provisions are central. The first concerns the so-called “black list”, which sets forth trading practices that are prohibited in all circumstances. The second concerns the so-called grey list, which contains trading practices that are prohibited unless clearly agreed in advance by the parties.
As supervisory authority for LOH, the SCA initiated a major investigation into unfair trading practices. The inquiry resulted in several cases, including the one below – which is of particular interest.
Prohibition of unilateral amendments
Following a complaint, the SCA investigated whether a buyer of egg had unilaterally amended the terms of price and payment with its suppliers, who in this case were farmers. More specifically, the buyer had introduced what was known as a “market-adjusted price”, which mean that prices were adjusted weekly. This implied that the buyer, based on its own sales, unilaterally adjusted the price paid to the supplier. The buyer bought directly from farmers, repacked the eggs and sold to both the retail and food industries, where the eggs were used in food processing.
The SCA investigated in detail how the supplier’s pricing model with the so-called market-adjusted price related to the prohibition of unilateral changes in LOH.
Assessment by the sca – no violation
In particular, the SCA analysed if the buyer had unilaterally enforced a change to the contractual terms. Under section 5(1)(3) of LOH, a buyer is prohibited from unilaterally modifying the terms of the contract regarding the interval, method, place, time or volume of delivery, quality requirements, payment or price. It is clear from the wording that the provision is aimed at modifying the terms of an existing contract.
The SCA concluded that it was the buyer who contracted the supplier for a certain period. The buyer also amended standard contracts, but that there was no particular term as to how often the price would be communicated to the farmer. Instead, according to the SCA, it was the buyer who set the price and could independently raise or lower it in relation to the egg producers, depending on market developments. The price was communicated to the farmer prior to delivery. The farmer was free to opt out and not supply the eggs to “market-adjusted price”. Against this background, the SCA closed the case without investigating the matter further.
[1] 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.
