The Croatian Competition Agency (AZTN) has issued a decision fining the retail chain Tommy from Split an amount of €212,500 for a serious violation of the Act on the Prohibition of Unfair Trading Practices in the Food Supply Chain. This monetary penalty was imposed after it was determined that Tommy was selling certain food products at its sales locations at prices lower than their purchase cost, specifically, at prices lower than those at which Tommy procured them from suppliers, including value-added tax (VAT).
AZTN emphasized that selling products below purchase cost is directly prohibited by the Act above, as such practices distort market competition rules. The primary victims of this conduct are small producers, family farms, and small retailers; however, consumers themselves are ultimately also affected in the long term. Although it might initially seem that low prices benefit consumers, the systematic application of such tactics can reduce market choice, jeopardize the survival of smaller producers, and eventually lead to higher product prices. The violations in question stem from specific promotional discounts implemented by Tommy, notably a 10% discount on total purchases for pensioners, which was applied even to already discounted items. As a result, for twelve products, the retail price fell below the purchase cost.
AZTN stated that it has no objections to discounts as a standard business practice, but warns that discounts must not lead to breaches of the law—that is, sales made at a price below the purchase cost. The fine was imposed because Tommy engaged in a practice that is explicitly prohibited and defined as a “serious violation” of the law, regardless of the retailer’s motives or the circumstances under which this occurred. The agency further explained that such practices are also defined within European legislation to preserve fair market competition, protect local producers, and maintain the stability of the food supply chain.
Tommy, for their part, said that the discounts for pensioners were intended for the most vulnerable consumer groups, and that the costs of these promotional activities were borne solely by Tommy, without harming suppliers or the market. They expressed the view that AZTN’s decision represents an overly strict interpretation of the law and that no one in the supply chain suffered material harm. On the other hand, AZTN emphasized that the law recognizes no exceptions, and the entire retail sector must adhere to market competition rules to protect all market participants, including small producers, family farms, smaller retail chains, and ultimately all consumers.
The Act on the Prohibition of Unfair Trading Practices (ZNTP) is stringent when it comes to sales of goods below purchase cost, as this creates imbalances and can lead to the demise of small family producers, reduced competition, and, in the long term, lower product quality and higher prices for end users.
The penalty of €212,500 imposed on Tommy is considered high in situations involving violations of this type of law, and it also serves as a warning to all other retail chains in Croatia about the seriousness and stringency of ZNTP enforcement. According to AZTN, the fine reflects the seriousness, scope, duration, and possible consequences of such violations for the market and the survival of domestic producers.
This case has sparked various reactions in the public, with some associations and citizens advocating for a more flexible approach, while producer organizations and parts of the professional community support AZTN’s decisiveness, arguing that it is essential to maintain fair and transparent relationships in the food supply chain in Croatia.
Circumstances Leading to Tommy’s Fine
The Competition Agency (AZTN) initiated proceedings against Tommy after determining that the retail chain was selling certain food products at prices lower than their purchase price, including VAT. The reason for initiating the proceedings was that, as part of a promotional campaign, Tommy introduced a permanent 10% discount for pensioners, which could be applied to already discounted products. This combination of discounts with existing sale prices resulted in the final sale price for twelve products falling below the amount Tommy paid to acquire them from suppliers.
AZTN found that such practice was unlawful, as sales of products below purchase price are explicitly prohibited by the Act on the Prohibition of Unfair Trading Practices in the food supply chain. The agency clarified that discounts and promotions themselves are not the issue, but sales below purchase price represent a serious breach of legal provisions. In its view, such business conduct by Tommy distorted market competition and compromised the stability of supply chains, potentially causing negative consequences for small producers, family farms, and smaller retailers.
Tommy responded that the pensioners’ discounts were designed to support vulnerable consumers and that all costs associated with the promotion were borne solely by Tommy, without causing harm to suppliers or the market. They also argued that AZTN’s decision represents a strict interpretation of the law and that no party in the supply chain suffered material harm. However, AZTN emphasized that the law permits no exceptions regarding sales below the purchase price, regardless of the retailer’s motives or the reasoning behind offering such discounts.
Due to these circumstances, AZTN imposed a fine of €212,500 on Tommy, which is one of the more significant sanctions in this field. The penalty reflects the gravity and scope of the violation, as well as the potential negative consequences for the market and domestic producers.
In summary, the fine was imposed because Tommy, by combining a permanent discount for pensioners with already discounted prices, ended up selling products at a price below their purchase value—contrary to the applicable law and detrimental to the entire supply chain and market competition.
Impact of the Fine on Tommy, AZTN’s Rationale, and Wider Consequences
The high monetary fine of €212,500 will undoubtedly have a significant effect on Tommy’s business operations. Above all, it represents a substantial financial blow that could reduce profit margins, especially during a period when the retail sector is already facing challenges due to rising costs and slowing consumer demand. As a result, Tommy will likely plan its promotional activities more cautiously and ensure, with greater diligence, that retail prices do not fall below purchase costs. In the future, it can be expected that their marketing and sales teams will align more closely with legal regulations to avoid repeat violations. This case may also prompt closer cooperation and more transparent relations with suppliers to prevent future price inconsistencies.
The Competition Agency justified its decision by emphasizing the importance of preserving fair market competition and protecting smaller producers, family farms, and other participants in the supply chain. A key provision of the Act on the Prohibition of Unfair Trading Practices is the ban on selling food products at retail prices lower than their purchase price, including VAT. The purpose of this provision is to prevent “below-cost” trading, which could harm competition in the long run and push producers out of the market. The law classifies such conduct as a serious offense, regardless of whether it arises from promotional activities or targeted actions for vulnerable groups, such as pensioners.
The fine also has broader implications for other retail chains in Croatia. Most of all, it sends a strong message to all retailers that the regulator closely monitors compliance with the law and is prepared to sanction unfair trading practices consistently. This will prompt retail chains to review their promotional policies and sales campaigns more carefully to ensure compliance with legal requirements. As a result, a general increase in caution and a possible reduction in aggressive discounts or complex combinations of discounts that could result in sales below purchase costs are likely to be seen. Smaller retailers must exercise particular caution, as violations of this sort could have especially harmful effects on their survival.
Retailers’ reactions to the fine are often characterized by concerns over the strictness of the law’s interpretation. Many believe that such regulations could limit the flexibility of promotions, which may be detrimental to consumers—especially to vulnerable groups intended to benefit from programs like pensioners’ discounts. Consumers, especially those who benefited from the discounts, may be disappointed by the reduction or elimination of such offers. In the media, the penalty is interpreted in different ways: some experts and parts of the public support strict enforcement of the law to protect competition, while others call for greater flexibility and understanding for the social dimension of such discounts. Overall, the Tommy case has sparked a crucial discussion about striking a balance between regulation and consumer protection in Croatia.
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