Insights

CHANGES WIDEN THE SCOPE OF RESTRICTIVE INDIVIDUAL TRADE PRACTICES REGIME

15/10/2019

Amendments to the legal regime on restrictive individual trade practices contain important changes, in particular, for companies in industries involving distribution, promotions and sales to the public.

Due to enter into force on 28 October 2019, these amendments, established by  Decree-Law 128/2019, of 29 August, mean that companies will need to revise their distribution contracts, both current and future, as well as overhaul various internal procedures.

The purpose of the amendments is to continue to guarantee competition, fair dealing and good faith in the market and provide additional protection for small businesses, ensuring they are not overshadowed by their ‘big business’ counterparts.

The main points to note are as follows:

1. The regime now applies to any commercial transaction in Portugal, regardless of whether or not a company is established or has a base here. The law is as yet unclear on how exactly this will be controlled and how taxes, sanctions etc will be applied by ASAE (The Economic and Food Safety Authority). Companies should look into whether their dealings in Portugal may fall within this new wider application and, if so, the potential implications that they need to mitigate.

2. Companies are now obliged have all their business documents in writing (price lists, terms of sale, supply contracts, etc), whether physically or digitally, and keep copies for at least three years. The powers of ASAE have also been extended to ensure compliance with these requirements and relevant sanctions.

3. ASAE now also has the power to initiate actions to prevent abusive business practices that may affect the normal functioning of the market and jeopardise public interest. Business practices that impede subsequent sales to another company at a lower price are prohibited, as well as any that include the following:

a)        Exorbitant prices, payments terms, penalties etc within the contractual conditions;

b)        Disproportionate compensatory measures in the form of credit and debit notes with over a three-month term from the relevant invoice date;

c)        Retroactive non-contractual changes to supply contract conditions;

d)        Deductions by one party to invoices for the supply of goods and services where inadequate reasons are given and the other party objects within 25 days; and,

e)        Any unilateral practice that imposes the anticipated performance of a contract without compensation or any debts following the supply of goods or services.

4. We would advise that companies look into providing training to their staff, in particular to their sales teams, as the above points are crucial in the negotiating of distribution and supply contracts.

5. With regards to promotions and sales, the amendments redefine the definition of the “effective purchase price” as well as set out how discounts must be presented: either (i) on the invoice itself, (ii) in supply agreements or price lists effective at the time of the transaction, or (iii) on credit or debit notes issued no more than three months from the relevant invoice date.

We foresee that this last point may cause difficulties for many companies given that discounts are usually only applied after a year and as such they may need to review and overhaul their internal practices.

Also to note that deferred discounts can only be given on the basis of the subsequent purchase of the relevant product.

If you need further clarification on any of the issues above or want to find out how your company may be affected and any action that needs to be taken, then please do get in touch (geral@ammoura.pt)

 

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