New legislation for Russian retailers

A new law regulating trade activity in Russia came into force on February 1, 2010. The bill was the subject of intense discussion and debate among legislators, representatives of trade networks and manufactures. As a result of discussions held and compromises reached, the final version of the law establishes a special regulatory framework for trade in food products.

In attempt to restrain the growth in food prices, the legislators have forbidden the inclusion in supply agreements of any additional conditions concerning the provision of services by retail networks to manufacturers which would require additional payments for the sales promotional by networks and other such payments. As from February 1, 2010 food supply agreements may only provide for the payment to the purchaser of an additional reward not exceeding 10% of the price of the goods in return for the acquisition of a particular quantity of products. The new law also clearly regulates the timeframe for settlement between manufactures and retail networks for supplied food products according to the type of product. Supply agreements which have already been concluded and are in force must be brought into line with these provisions of the law within six months of the date of entry into force of the law. It goes without saying that the new rules for the regulation of trade in food products will generate a need for adjustments to existing agreements and the developments of a new structure of co-operation between retail networks and food manufacturers, which is bound to have certain tax implications. It should further be pointed out that the new law also regulates the manner in which retail networks operate and imposes restrictions on their presence in a given region. Those restrictions are likely to have a considerable impact on plans for the development of retail networks and their future strategy in regard to their presence within Russia. The majority of Ernst & Yang survey participants (72%) took a negative view of the new trade law.

However, only 8% of respondents believe that adapting to the requirements on the amended legislation poses a serious problem for the retail sector at the present time.

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