As food prices are both highly volatile and highly visible, the grocery retail market is the object of intense scrutiny by governments and competition authorities, particularly in periods of price instability of agricultural products. Competition authorities, either spontaneously or at the urging of government, have in many countries engaged in market studies or sector inquiries of the food and/or the grocery sector to better understand the pricing of foodstuff. The pricing of milk, bread, oil, flour, sugar, shrimps, mussels, meat, fruits, bananas, vegetables, beer and wine has been analyzed in a variety of countries.

The structure of the retail grocery sector is, in most countries, evolving structurally. Small traditional stores increasingly have to coexist with retail chains, commercial groupings and large-scale stores, and market concentration in the distribution of grocery products is often on the rise both locally and nationally. Also, “non-structural aggregations” of firms, such as retailers’ cooperatives, retailers’ voluntary associations, franchising contracts and alliances by companies to undertake joint purchasing and logistics functions, have considerably expanded in the last 20 years. Furthermore, recently we have witnessed the emergence of Internet food retail distributors competing with brick-and-mortar distributors.

At the vertical level, there have been, first, concerns that the most powerful retail chains are able to enter into agreements with the largest suppliers, which may increase barriers to entry and restrict both interbrand and intrabrand competition, for example, through category management agreements that reserve access to sensitive market information to a few partners or make access to shelf space more difficult for the competitors of the category captains. Second, in a number of countries, there has been a more general concern that large distributors may abuse their buying power vis-a-vis small suppliers and impose unfair terms and conditions on them, such as abusively low buying prices or abusively long payment delays or the imposition of upfront access payments, “pay to stay” fees, listing fees, slotting allowances or other unilaterally set contractual conditions. Third, the functioning of purchasing alliances and the multilayered negotiations between suppliers and various levels of intermediaries has also attracted scrutiny. Fourth, the conditions of cooperation between suppliers and large retailers in the launching of private labels and the competitive impact of such labels have also been investigated.

At the horizontal level, there are concerns about increasing concentration in the retail grocery sector because of the sustained merger and acquisition movement that has made the collective exercise of market power on the selling side by the most powerful grocery retail chains easier by, inter alia, facilitating the coordination of their policies, as well as the coordination of their marketing promotions policy and the exchange of sensitive commercial information among them. But beyond this, there has also been a concern in some countries that commercial estate management and affiliation contracts between independent retailers and retail chains, franchises and cooperative, which include “golden shares” aimed at blocking chain switching, exit fees for distributors wanting to leave a chain, long postagreement nonreaffiliation and noncompete clauses of long duration, as well as overlapping opaque contractual obligations of excessive duration, entry fees and the like, constitute barriers to changing chains and therefore restrict competition.

Even though competition authorities have tended to aggressively use their traditional enforcement instruments—such as merger control to fight excessive concentration of retail, control of abuse of dominance by retailers or sanctioning price fixing by grocery retailers and/or grocery product manufacturers or exchange of information among them—their enforcement actions have occasionally been considered ineffectual to redress some of the most obvious perceived competition problems in the retail grocery sector, such as the rapidly rising price of food products at certain periods, the disappearance of traditional small-scale grocers and the increase in concentration at the local level or the concentration of supply of grocery products in reaction to the increased concentration at the retail level.

As a result, in many countries, the retail grocery sector is subject not only to traditional competition law but also to regulations that tend to create barriers to entry for large-scale retailers. For example, planning laws may regulate the size and location of shops. In addition, specific sectoral laws restrict various aspects of the strategic freedoms of large-scale retailers with respect to their suppliers or competitors, through bans on resale below cost or the imposition of minimum resale prices for foodstuff. It is argued that such laws constitute better means of preventing monopoly pressure on suppliers and guarantee fair competition. The question of whether the standardization of contracts between food growers and retailers could alleviate both the instability of prices and the risk of unfair treatment of small farmers has also been debated in the number of countries.

Competition authorities have in general used their competition advocacy tools to try to discourage governments from adopting laws or provisions deemed to be potentially anticompetitive and/or to fight the proposals to exempt the food sector from competition law—thus allowing, for example, small farmers or fishermen to collectively negotiate with the powerful retailers—but more often than not such advocacy has fallen on deaf ears.

When such provisions are part of the competition law, competition authorities may have difficulties enforcing them because they tend to be loosely worded and seem to be based on concepts of “fairness” or “level-playing fields,” which have, in some cases at least, the potential of being at odds with the logic of efficiency that underlies traditional competition law. There is an abundant jurisprudence when the sectoral laws related to the retail grocery sector are enforced by courts or by bodies other than competition authorities, but the risk of contradiction between this body of jurisprudence and the approaches followed by competition authorities is more pronounced.

Overall, the important and controversial questions are whether competition law can in itself be a powerful enough instrument to achieve efficiency in the retail grocery sector, whether competition failures not easy to handle through competition law require that regulation specific to the retail sector or to the grocery sector exist to complement competition law, whether other socioeconomic goals than the pursuit of economic efficiency justify regulatory intervention in the retail grocery sector and, if there are competing goals, whether there are mechanisms to ensure that inconsistencies between competition law and sector-specific regulations are kept at a minimum.