© Springer-Verlag Berlin Heidelberg 2015Pierre Kobel, Pranvera Këllezi and Bruce Kilpatrick (eds.)Antitrust in the Groceries Sector & Liability Issues in Relation to Corporate Social ResponsibilityLIDC Contributions on Antitrust Law, Intellectual Property and Unfair Competition10.1007/978-3-662-45753-5_1
1. International Report
ESSEC Business School, Paris, France
University College, London, UK
This contribution synthesizes the eighteen national reports answering the questionnaire on the grocery retail sector.1
At the outset a caveat is necessary. A large proportion of respondents to this survey come from countries that are Member States of the European Union and share the same (European) legal system. At the same time, and even though non-European countries such as the United States, Japan or Australia responded to the questionnaire, some major countries with a long experience in competition law and competition policy are outside the scope of this report.2 It should thus be clear that, to a certain extent, the observations and conclusions in this report are influenced by the particular set of countries that have responded to the LIDC questionnaire. We are, however, confident that the examination of the 18 countries that have contributed allows us to come to some robust conclusions.
Before starting our analysis with an examination of the structure of the grocery retail sector, five general observations are in order.
First, laws that apply to the grocery retail sector are to a large extent the same laws that apply to the retail sector in general. Those laws are partly laws that apply to all economic sectors (such as competition law), partly laws that are specific to the retail sector (such as the laws establishing the conditions under which a large-scale retail store can be opened) and, more rarely, certain laws or regulations that are specific to the grocery retail sector (such as some consumer protection laws applying to the sale of fresh products). Whenever possible, we have tried to identify where laws are specific to the grocery retail sector or where general principles or laws applicable to the whole retail sector have been applied specifically in the grocery retail sector.
Second, while most countries that provided a report are countries that have a civil or continental system of law, this is not the case for Australia and the United Kingdom. As we shall see, the style of competition law enforcement for the grocery retail sector in those countries is markedly different from what it is in other countries (in particular, they rely more on self-regulation than the other countries in the sample).
Third, a study of competition issues in the grocery retail sector requires consideration of the relationship between retailers and their suppliers, whether they are manufacturers of prepared food or intermediaries trading in agricultural products. As we shall see, the relationship between the intermediaries and the suppliers is also of interest to understand their downward relationship with grocery retailers. Thus, most of the contributions extensively analyze the vertical chain that starts with farmers and ends with the retailers, and we will report on the sometimes complex relationships between the upstream level and the downstream level along the vertical chain to shape competition on the final market for grocery goods.
Fourth, the term “grocery” may be imprecise since, particularly in the modern retail sector, grocery stores have diversified their offerings and sell a wide variety of fresh or transformed products, some of which are food products and others are nonfood products. Most of the contributions focus on the offering of products derived from agriculture, whether transformed or not, in retail groceries. Indeed, it seems that it is in this part of the market that the competition problems are the most complex. This report also focuses on the foodstuff part of the grocery retail sector.
Fifth, the countries that are being investigated have different histories, different levels of economic developments, different cultures and different legal systems. A number of the observations that one can make when comparing the situation of competition and competition law enforcement in the grocery retail markets of these countries are grounded in those differences.
1.1.1 Economic Background
In our sample of countries, the concentration of the grocery retail sector varies widely from one country to the next. One can distinguish three groups of countries.
First are countries where the retail grocery sector is very highly concentrated: this group includes Australia (CR2 = 80 %), the Netherlands (CR2 = 55 %), Austria (CR3 = 87 %), Finland (CR2 = 80 %) and Belgium (CR3 = 75 %). The Australian report suggests that large retailers have buying power over food processors but that their buying power over farmers is less certain because farmers have an alternative in export markets. Thus, it appears that the idea according to which more concentration usually means less intense competition may not always hold in the grocery retail sector.
A second group of countries exhibit medium to low concentration in the grocery retail sector. In this group, one finds Germany (CR4 = 85 %), Sweden (CR4 = 80 %), Estonia (CR3 = 60 %), France (CR6 = 80 %), the United Kingdom (CR8 = 85 % and CR4 = 66 %) and Italy, where the modern distribution model accounted for about 70–72 % of food product sales in recent years. In other words, the “natural” shift in food product sales from small traditional shops and other market entities to large-scale retail outlets seems to have stopped at the levels noted above. The Swedish report suggests that because food processors in Sweden are fairly concentrated, the buying power of retailers and the selling power of food processors are fairly balanced. Finally, the report concerning the United Kingdom suggests that farmers’ unions are able to exert industrial and political pressure on processors and retailers (thus limiting their buying power).
In a third group of countries, concentration of the retail sector appears to be low or very low. This group includes the United States, where the top 20 retailers account for 63.7 % of the market and the top four retailers hold 37 % of the market. This group of countries with low concentration in the grocery retail sector also includes Hungary (CR3 = 40 %), Bulgaria, Romania and Ukraine. In these countries, particularly in the latter three, the development of modern retail is relatively recent since this form of retail appeared only after the countries moved to a market economy in the 1990s and a strong attachment to traditional forms of small-scale retail still seems to exist in at least some of these countries. For example, in Romania, 60 % of Romanians prefer to buy their groceries from a traditional trade unit (corner or neighborhood shop) and in Bulgaria, in 2010, about 60–70 % of all grocery sales were channeled through traditional retail establishments.
It is more difficult to categorize intermediaries and food processors. Not only does the situation vary from one country to another, but also the situation varies from one grocery product to another within the same country. Furthermore, not all reports provide details about the intermediaries or the processors of food products.
If one moves now from processing to agricultural production, the situation can again be divided into three types of situations. In countries such as Bulgaria, Austria, Italy, Romania and Finland, the agricultural sector is extremely fragmented. It is interesting to note that two of these five countries—Austria and Finland—are countries where the level of grocery retail concentration is high. As we saw previously, there is some concentration at the food processing level in Finland and Italy, but this does not seem to be the case in Austria, where grocery retail chains are likely to have unchallenged buying power.
In countries such as the United Kingdom, the Netherlands or Sweden, even though agricultural production is atomistic, farmers sell through associations or cooperatives and thus have some market power. The United Kingdom report describes a situation where farmers are able to exert considerable political and business pressure on the downstream food processors, wholesalers and the retail sector.
Finally, the situation in Germany seems to be in a state of flux with a steady decline of the total number of agricultural production entities and a growing number of large entities in primary production.
The economic assessment of the structure of grocery retail, food processors and agricultural production suggests that different competition problems will be prevalent in different countries. In some countries, buyer power will be confronted with seller power and there will be a balanced confrontation between the two, sometimes in spite of a high level of grocery retail concentration (for example, in Sweden, the United Kingdom and Australia). In other countries (for example, Germany), buyer power will prevail and public policy will be focused on ensuring that this power is not used unfairly or anticompetitively. In a third type of country (such as Bulgaria, Romania and Ukraine), both retailers and suppliers will have an atomistic structure, at least at the general level, and the main issue will be the abuse of dominance of those few retailers having a large market share at the local level.
But in order to better understand the competition law issues in the grocery retail sector, one must have a close look at the legal and regulatory environments of retail grocery.
1.1.2 Legal Background
In many countries, a large number of laws and regulations apply to the retail sector. The goals of those laws are to promote competition or to ensure fairness in exchanges or to regulate certain aspects of the retail trade for sociopolitical reasons. Whereas those goals might seem at first sight to be complementary, they are often contradictory. The situation in the United States, however, is in sharp contrast with that of the other respondents. The United States has both less competition-specific regulation and less overall regulation when compared with many European countries.
18.104.22.168 Competition Law
In most countries, there is no specific competition regulation that applies to the grocery retail sector, which is subject to the general provisions of competition law. For example, in the United States, the grocery sector is covered by the Sherman Antitrust Act, the Federal Trade Commission Act and the Clayton Antitrust Act. The industry is also subject to the Robinson–Patman Act, which was an amendment to the Clayton Act, though federal enforcement under the act is largely dormant and private enforcement is dwindling. There are no sector-specific competition laws or exemptions for the grocery retail market in the United States.
In some countries,3 national competition law includes not only a prohibition of anticompetitive practices or transactions, which might lead to the elimination, prevention, limitation or restriction of competition, but also a ban on unfair competition.
In most other countries, national competition law and the law against unfair trade practices are separate laws that both apply to the grocery retail sector. This is, for example, the case in most Member States of the European Union where national competition laws are usually modeled on EU competition law and apply concurrently with it.
Typically, national competition laws will prohibit horizontal and vertical agreements and concerted practices that have as their object or effect the restriction of competition (such as cartels or exclusive dealing), the abuse of a dominant position or the misuse of market power (such as exclusionary practices whereby a firm with market power or a dominant situation eliminates competition) and anticompetitive mergers.
Several forms of conduct particularly relevant to the grocery sector such as cartels (price fixing, market and customer allocation), primary boycotts, third line forcing or minimum resale price maintenance are in certain countries subject to per se prohibitions.
In a few cases, the national competition law includes provisions that are specific to the retail sector. This is, for example, the case in Germany. The German Act against Restraints of Competition4 explicitly prohibits undertakings with superior market power to abuse their market position by selling goods or services below cost price without an objective justification. However, the prohibition to sell below cost price is widely seen as of very limited scope.
Occasionally, competition laws have been amended to better deal with concerns raised primarily in the grocery sector. Thus, for example, in 2007 Australia introduced into its competition law a specific prohibition against predatory pricing, which applies when a company with substantial market share supplies, or offers to supply, goods or services for a sustained period at a below-cost price for a prohibited purpose. The adoption of this provision was driven largely by concerns about low-cost pricing in the grocery market destroying small business.
In some countries, even though there are no provisions specific to the retail sector in the competition law, the government is considering the introduction of such a provision. For example, in Finland, a recently adopted section of the Competition Act stipulates that an undertaking, whose market share is 30 % or more of the daily consumer goods retail market, is considered to hold a dominant market position. When calculating the market share of the grocery retailer, the total retail operations of all the undertakings belonging to a certain retailer group would be taken into account.
22.214.171.124 Exemptions from Competition Law Prohibitions
Different types of exemptions from competition laws can be found for the retail sector or some parts of the grocery business. First, in a number of countries (in particular, European countries and Australia), there is an exemption for anticompetitive practices—for example, anticompetitive agreements—that contribute to economic progress or have public benefits. Such exemptions are sparingly given, however. Second, in other countries where there are no formal exemption, groupings of small suppliers will get an exemption from competition law for otherwise prohibited practice on public interest grounds. Third, some countries (again, certain European countries) have a de minimis exemption either resulting from EU competition law or unrelated, in which case they only apply to domestic practices that have no effect on interstate trade. Fourth, a number of countries exempt, in part or in whole, agricultural producers’ groupings from competition law (for example, cooperatives in Japan). Fifth, a smaller number of countries have (or had) block exemptions for voluntary chains of small retailers.
Exemptions from Competition Law for Agricultural Groupings
In several countries, specific anticompetitive practices may be exempted on the basis of their contribution to economic progress or on public interest grounds.5
Aside from the individual exemptions previously mentioned, farmers’ groupings or associations are also frequently exempted from competition law either because the de minimis rules apply to them or because they benefit from a specific group exemption if they meet certain criteria.6
In France, there is no formal exemption from competition law for the agricultural sector. However, the French Competition Authority (hereafter “FCA”) considers that groupings of producers of agricultural products can be exempted from competition rules because of their contribution to economic progress for the commercialization of products, provided that their practices remain proportionate to the objective. Furthermore, the French Rural Code7 exempts from competition law agreements concluded within officially recognized interprofessional organizations aimed at (1) adapting supply to demand through a forecast of demand and a coordination or planning of production, (2) planning and restricting production to improve the quality of products, (3) limiting production capacity, (4) temporary restriction of the entry of new firms based on objective criteria and implemented in a nondiscriminatory manner or (5) fixing sales price by producers or the price at which they will buy back their production. No party to such an agreement should have a dominant position on the relevant product market, and those agreements have to be notified, after their conclusion and before they are enforced, to the Minister of Agriculture, to the Minister in charge of the Economy and to the FCA. In the dairy sector, the French Rural Code8 allows interprofessional organizations to develop and issue information on product prices, without these practices being subject to the prohibition of anticompetitive practices.
Exemptions from Competition Law for Groupings of Small Retailers
Just as farmers’ groupings are exempted from competition law to allow them to withstand the pressure of large-scale retailers, small retailers in voluntary chains are also exempted from competition law in some countries to allow them to better compete with large-scale retailers.9
126.96.36.199 Laws Against Unfair Trade Practices
Unfairness Vis-à-Vis Other Firms
In most countries, the laws prohibiting unfair trade practices also apply to the retail sector and the grocery retail subsector. The content of laws against unfair trade practices varies from one country to the next but may prohibit a large number of practices. Some trade practices of large-scale retailers may be prohibited because they are considered to be unfair to suppliers (for example, suppliers of agricultural products); others may be prohibited because they are seen as unfair to competitors (for example, small grocery stores); finally, some practices are prohibited because they are considered to be unfair to final consumers.
When applied to the grocery retail sector, laws against unfair trade practices are often used to curb the negotiating power of large-scale retailers.
Some of those prohibitions tend to prevent retailers from abusing their buyer power by requesting or gaining “unjust economic benefits,” “unjust price reduction,” “unjust consignment sales contract” or “unjust assignment of work to employees of suppliers,”10 “contributions from the suppliers related to the retailer’s price reductions,”11 “payment of fees or tariffs related to the expansion of the retailer’s network, the development of its sale space or the operations and events for promoting the retailer’s activity and brand image” or “payment for services that are not directly linked to the sale operation”,12 “retroactive benefit of rebates, discounts or commercial cooperation agreements”.13 In France, the submission of a partner to obviously abusive payment conditions14 or to obligations creating a significant imbalance is also prohibited.15 The retailers are prohibited from requesting payment for a supplier to be referenced before any order is made.16
The general prohibition against unjustified or abusive requests by retailers can lead to the prohibition of particular forms of business behavior of the retailers. The prohibited practices vary from country to country, reflecting the specificities of the tensions between retailers and their suppliers in each country.
Some countries restrict the ability of retailers to delay payment of their suppliers in general or for specific products.17
In spite of the wide scope of laws against unfair trade practices, in a number of countries there is a debate as to whether general laws prohibiting unfair trade practices are sufficient to prevent the negotiating abuses of large retail chains vis-à-vis their suppliers. Although competition authorities have in several countries concluded that a specific legislation or regulation to curb the buying power excesses of large retail chains was unnecessary, a number of governments under pressure due to a large number of complaints by farmers or food processors have nevertheless adopted such laws or regulations.18
It is interesting to note that if slotting fees are considered to be unfair in some countries (such as in Italy), they are not necessarily always considered to be anticompetitive. In 2001 and 2003, the US Federal Trade Commission (the “FTC”) published a staff report on slotting fees, also known as “pay-to-stay” fees paid by manufacturers. The reports resulted in theories for how such arrangements, where manufacturers pay retailers for premium shelf space, would be anticompetitive. However, the 2003 report was not able to find data and economic models that conclusively determined antitrust harm or injury resulting from slotting fees.
Unfairness Vis-à-Vis Consumers
In Australia, unfair terms in consumer contracts are also prohibited, and these prohibitions apply to the grocery sector. In Estonia, the Consumer Protection Act imposes certain information and transparency requirements on retailers and prohibits a range of unfair commercial practices. In the United Kingdom, the Consumer Protection from Unfair Trading Regulations 2008 sets out a broad prohibition on unfair commercial practices, which include both misleading actions and misleading omissions.
Enforcement of Unfair Trading Laws
While unfair trading laws are usually enforced through the courts rather than by competition authorities, there are some exceptions to this principle. For example, in Romania, the law on unfair competition19 provides a general prohibition of unfair competition and applies to the grocery sector. This law was traditionally enforced by domestic courts, but the Romanian Competition Council took over the enforcement of this law and initiated a legislative process for the review of the law and the enactment of secondary legislation.
188.8.131.52 Other Laws and Regulations Applying to the Retail and Grocery Sector
Besides competition law and laws against unfair trading practices, a number of other laws and regulations on retail distribution (such as zoning laws, laws on the opening hours of stores or price regulations, unit pricing laws) apply to the grocery retail sector or are sometimes specific to the grocery retail sector. A number of those laws and regulation have the object of protecting small retailers and the effect of restricting the strategic freedom of large-scale retailers, whether by making it difficult for them to open or enlarge their stores or by limiting the number of hours during which they can stay open.20 In rare cases, some of those laws are designed to protect or promote competition in the grocery retail sector.
As a contrast to the situation in previously mentioned countries, in the United States, nonrestrictive local zoning and relatively little land use restrictions have allowed niche providers like green grocers, gourmet food stores and organic markets to enter urban and high-income areas in proliferation. At the same time, Wal-Mart has grown quickly in rural areas to openly compete with local and regional chains that previously faced little competition. Equally, while Sunday shopping laws that have a secular purpose are constitutional in the US, between 1966 and today many states and municipalities have repealed those laws or had them overturned for a variety of issues related to the Establishment Clause of the first Amendment to the US Constitution,21 which prohibits any government interference with or support for any religion or creed, job creation, consumer preference, retail sales lobbying. Further, in 1964, the Supreme Court sustained, against an antitrust claim, a collective bargaining agreement that prevented a supermarket chain from selling meat on Sundays. Such clauses no longer exist in grocery market where unionized stores face vigorous competition from nonunionized ones.
184.108.40.206 Pricing Regulations
Pricing regulations in the grocery sector have a wide range of objectives. Some aim at eliminating predatory pricing22 by large retailers23; others aim at allowing suppliers to impose a maximum resale price for grocery products or at controlling the resale price of goods sold through retailers.24 Occasionally, such provisions impose a minimum resale price for products considered to be dangerous to the health of consumers.25
The United States has largely moved away from price controls and other efforts to ensure farm gate prices and has developed less anticompetitive means of supporting a critical sector of the economy—such as producer subsidies—rather than involving itself in the question of pricing or relative bargaining power throughout the supply chain. However, notable exceptions do exist. Domestic producers of some agricultural products—such as sugar—have been able by political means to obtain price controls or other barriers to lower-cost production from abroad, and the federal Robinson–Patman Act, dealing with price discrimination, was vigorously enforced by the Federal Trade Commission until the 1960s then was increasingly criticized by the DOJ, economists and others in the 1970s. Since the 1980s, the Robinson–Patman Act, while still on the books, has ceased to be enforced and therefore ceases to be a significant restraint on efficient markets in grocery products.
220.127.116.11 Laws Designed to Empower Consumers to Make Competition Work Better Among Retailers
Australia has adopted unit pricing laws specifically targeting supermarkets to promote competition in the grocery sector by ensuring that consumers are able to make informed choices. The unit pricing laws take the form of a mandatory industry code that applies to grocery retailers. This Code applies to grocery retailers with more than 1,000 m2 of floor space and that sell a minimum range of food-based groceries. The Code also applies to online grocers. Once a retailer falls under the Code, all grocery items must have a unit price displayed unless the item is exempt (e.g., bundled items). The unit price must be prominent, close to the selling price, legible and unambiguous and must be displayed in dollars and cents.
18.104.22.168 Laws Deregulating the Retail Sector
In all of the contributions except one, there is very little said about attempts to deregulate, partially or totally, the retail sector in general and the grocery sector in particular. Quite the contrary, as we just saw, there has been and there is still a tendency on the part of governments to constantly increase the regulatory burden in the grocery sector in an attempt to better monitor the tense relationships between large-scale retailers and other operators. One exception worth mentioning is Italy, where there has been a real effort at deregulation of the retail sector since the beginning of the 2000s.
The “Bersani Decree”26 reformed the commercial sector and was a significant step towards the deregulation of the market and the simplification of bureaucratic and administrative procedures. The law establishes general principles and puts Regions in charge of planning commercial development and establishing urban planning measures. This Decree makes a distinction between “food” and “non-food” distribution, and this simple distinction replaces 14 goods categories previously used. It also distinguishes retail outlets in the following categories: neighborhood outlets, medium-sized sales structures, large sales structures and shopping centers. The law27 implementing the EU directive on internal market services28 provides that the access to and exercise of services may not be subject to unjustified or discriminatory limitations. A subsequent regulation29 guarantees the principles of free enterprise and competition. Under this Decree, the provisions governing access to and exercise of economic activity must not contain restrictions unless in the public interest and must not discriminate, directly or indirectly, on the basis of the nationality and registered office of the enterprise.
Another piece of legislation30 gave businesses the option of not complying with set opening and closing times, the obligation to close on Sundays and holidays and to close for a half-day during the week, on an experimental basis, and only for those businesses located in municipalities that are on regional tourist location lists or art cities. Subsequently, the “Save Italy Decree”31 introduced further deregulations regarding both the management and opening of new sales outlets with the aim of relaunching the Italian economy. It extended the deregulation provisions to the opening days and times referred to under Law Decree no. 98/2011 to all commercial businesses and not just those located in tourist locations or cities of art. Starting from 1 January 2012, commercial enterprises32 and businesses that provide food and drink in Italy can carry out their activities without any restrictions on opening times and without the obligation to close on Sundays or holidays.
1.1.3 Market Studies
As is clear from the developments above, the relationship between large-scale retailers, small-scale retailers and small-scale suppliers is a highly sensitive issue, and in most countries there is an elaborate, and sometimes quite complex, array of regulations to monitor the relationships between the various players.
The issues raised by the functioning of the grocery retail market are even more sensitive politically since, above and beyond the issues previously mentioned, the objective pursued by many governments is to keep the price of food as low as possible for consumers and the price of agricultural products sufficiently high for farmers to enable them to make a living.
The press is quick to suspect that lack of competition among intermediaries—such as wholesalers—or retailers is the source of the perceived high prices of food and that abuses of buying power is the source of the low level of prices paid to farmers for agricultural products.
With the exception of Estonia, where the competition authority has not done any market study on the grocery sector, the competition authorities of all the other countries that participated in the survey have undertaken one or several sector inquiries in the recent years. The scope and focus of those inquiries vary.
Some of these studies are general studies of the grocery retail sector either at the national level or in a given geographical area: the United States, Sweden (2002, 2004 and 2005), Nordic countries (2009 and 2011), Australia (1999), Austria (2007), the United Kingdom (2008), Romania (2009), food retail sector in France (2012) and Italy (2007, and a study started in 2010 and ended in 2013).
A second set of inquiries or market studies is focused on retail and/or supermarket prices and whether those prices are competitive: Australia (2008), Belgium (2012), Netherlands (2009) and Finland (2010).
A third set of market studies focused on the exploration of buyer power by retail chains and its implications for the upstream suppliers in general and the farmers: Netherlands (2004), Finland (2012), Japan (2011 and 2012) and Hungary (2007 and 2009).
A fourth set of market studies analyzed specific product markets of basic staples such as fish (Netherlands 2011), wheat, bread, dairy products, cooking oil (Bulgaria), milk (Germany 2012), eggs (Ukraine 2012), sugar, sunflower (Ukraine 2011) or dry pasta (Italy 2011).
Finally, a last set of market study analyzed specific issues related to the distribution of foodstuff such as the affiliation contracts of independent stores to retail chains and the conditions of purchasing commercial real estate in the food retail sector (France 2010) or category management agreements in the retail sector (France 2010).
As this list suggests, the grocery retail sector is probably one of the most frequently studied sectors.
22.214.171.124 Reasons for Conducting Market Studies
The reasons for undertaking those market studies are varied.
A first set of market studies was undertaken to investigate high prices. In a substantial number of countries,33 the concern that food prices are high or higher than in neighboring countries or rising rapidly has been one of the important reasons for which national competition authorities have undertaken a market investigation of the grocery market. One can suspect that in some cases, public authorities or the media put pressure on the Competition Authority to do something about the high price of foodstuffs for consumers. If they lacked evidence of clear-cut anticompetitive practices to be investigated or sanctioned, the Competition Authority could respond to this pressure by launching a general investigation of price formation in the sector. The publication of reports following these market investigations could help the Competition Authority explain why it did not have any reason to use its sanctioning powers and simultaneously suggest to public authorities measures that could alleviate the perceived pricing problem.
For example, grocery market investigations were launched because of concerns that food prices were higher in Sweden in comparison to the EU average, because of concern in Belgium that grocery prices were higher and increasing more rapidly than in neighboring countries, because of concerns that there were sharp increases in retail prices of the most important staple foods (such as bread, milk, and cooking oil) in Bulgaria, because there were concern in the United Kingdom in the 1990s that prices and profits were high in the grocery sector as well as concerns that prices were higher there than in continental Europe, because of concerns about the difference in food product price trends in Finland and in other European countries, because there were concerns in some regions of France about the increase in price levels, because there were concerns about the price differential between different types of stores in Ukraine.
In Italy, a survey on agro-food distribution was carried out partly because of the widespread perception that fruit and vegetable prices increased with the changeover from the Italian lira to euro on January 2002. Another study on the “Price transmission mechanisms along the agro-food chain: an analysis of dry pasta supply chain” was carried out as part of a project by the Authority to monitor food product prices, with specific reference to the ways in which raw material fluctuations were transferred downstream by the operators at the various stages of the production and distribution chain.
High Concentration Levels
In some countries, the concerns that led to the launching of a market investigation were the high concentration level in the grocery retail sector (e.g., Sweden) or the concentrated nature of the sector and the relatively homogenous nature of the products that created the risk of collusion (e.g., Netherlands) or the fact that the emergence of large-scale retail chains led to a higher concentration of the food retail sector (e.g., Hungary) or the perceived high level of market concentration at the retail level (e.g., Austria or France).
Allegation of Abuse of Buyer Power
In a third set of cases, market investigations were launched because of allegations of abuse of buyer power by supermarkets (e.g., Netherlands), because of concerns about the clauses of supplier contracts—applied by the retailers (e.g., Hungary), because of complaints about buyer power and substantial pressure put on suppliers by large retailers (e.g., Austria and Finland), because of persistent tensions between the retailers and suppliers (e.g., Romania) or because of allegations of unfair trade practices by large-scale retailers to the detriment of suppliers (e.g., Japan).
Low Purchase Prices, Anticompetitive Practices or Importance of the Sector for Consumers
In a fourth set of cases, market investigations were launched because of complaints about the low price paid by retail chains to producers of sour cherries, melons, apples or milk (e.g., Hungary and Germany).
In a fifth set of cases, market investigations were launched because there was a suspicion of possible anticompetitive practices (e.g., Germany and France).
In a last set of cases, market investigations in the food retail sector seem to have been launched because of the importance of the sector for consumers (e.g., Netherlands and Ukraine).
126.96.36.199 Outcome of Market Studies
Turning now to the results of these market investigations of the grocery retail sector, three main observations can be made.
First, in most countries, competition authorities did not find that there was a major competition problem in the grocery retail sector even when concentration was high or increasing. Thus, most competition authorities responded to the concern about the high or rising prices of grocery retail products by saying that other factors besides the lack of competition were responsible for the high level of prices.
In contrast to previously mentioned studies, the French Competition Authority found that a lack of competition was an important cause of high prices in French overseas “departments” and made different proposals in order to revitalize competition on such local markets. First, it initiated investigations in order to sanction some of the anticompetitive practices that had been identified in the course of the market investigation (such as imposed sale prices, horizontal anticompetitive practices, or clientele exclusivity agreements and restrictions on parallel trade). Second, it proposed legislative modifications designed to eliminate unnecessary regulatory entry barriers and to improve consumer information. Third, it suggested that in each overseas territory, local and regional authorities and state authorities should set up study missions with the objective of defining the conditions under which procurement and storage centers could be created and operated. But the French Competition Authority took a strong stand against the temptation to reinstate price controls in the overseas territories in response to discontent about the high level of prices.
One should also mention that the Ukrainian market investigation resulted in a finding that prices were unjustifiably high for some grocery products (such as sugar or sunflower), and the competition authority took action on prices and to improve the retail market of some products and initiated proceedings against economic operators.
Second, for the most part, competition authorities recognized that there was an imbalance in the negotiating powers of retailers and their suppliers, particularly when suppliers were agricultural producers. But, in most cases, the competition authorities did not recommend the imposition of behavioral constraints on the negotiating practices of retailers. The dominant feeling expressed by competition authorities was that buying power was only occasionally a competition problem and that, when that occurred, competition law instruments were adequate to deal with the problem.
The Japanese competition authority was clearly more concerned about what it calls the abuses of superior bargaining power of large-scale retailers, and it requested that trade associations of wholesalers and larger retailers make their umbrella organizations thoroughly understand the contents of the “Guidelines Concerning Abuses of Superior Bargaining Position under the Antimonopoly Act” published by the JFTC. It also indicated that it would act against illegal abuses of superior bargaining position.