Food for thought: competition and pricing

This week, the spotlight is on key regulatory risk issues currently faced by companies in the food and drink sector. Today, we focus on competition and pricing.

This week, the spotlight is on key regulatory risk issues currently faced by companies in the food and drink sector.  Today, we focus on competition and pricing.

Call to break retail oligopolies

Jean-Claude Juncker, President of the European Commission, has warned small groups of food retailers with market power that they may face competition law action at EU and national level.

Juncker's comments were made in response to recent complaints by farmers over the plummet in milk prices (which in some regions costs less than water).  Farmers complain that 'retail oligopolies' are exerting their market power (and negotiating power) unfairly to keep prices low and that this is making agriculture unsustainable.  They want the authorities to allow them to set milk prices.

It isn't unlawful for companies to have strong market power, but when that power is concentrated and exercised in a way that might be abusive, it can give rise to competition issues.  Juncker therefore calls for both EU and national authorities to look into the structure of the milk market, potentially with a view to breaking up some retail oligopolies.

The milk market has faced volatility across international markets generally this year.  This is likely owing to a number of factors (not just retailer power), for example, the quota regime that applied to milk ended this year and there has been stagnating milk consumption in Europe coupled with surplus milk production (largely attributed to the rise in competition from dairy free alternatives). 

Supermarket pricing in Norway

Norwegian supermarkets Coop Extra and Meny have been forced to change their pricing behaviours by the Norwegian Consumer Ombudsman because of discrepancies between the prices advertised on shop shelves and the prices actually charged at the checkout.

The Ombudsman had already warned Norwegian food chains in March this year that they could expect new controls over the course of 2015 because of frequent complaints about pricing discrepancies.  Now, after spot checks on seven major grocery chains in Oslo, the ombudsman has picked on Meny and Coop Extra. 

The Ombudsman stated that the pricing discrepancies by these supermarkets not only infringed the Norwegian Marketing Act but were also misleading, particularly for customers that choose an item because of the low price and then find that the price is higher at checkout.

It is the responsibility of grocery stores to ensure that price labels on the shelves match up with their checkout prices.

Vinegar maker fined in The Netherlands

The Dutch competition authority has fined natural-vinegar producer Burg €1.8 million for sharing commercially sensitive information with Kühne between 2001 and 2012.  Kühne escaped a financial penalty because it brought the infringement to the attention of the authority.

Natural vinegar is used in various consumer products including sauces, salads and pickles.  Kühne and Burg agreed what offers they would give to multiple customers that produce these products. They also exchanged price and production information.

Two individuals employed by Burg that oversaw the illegal activities were fined €16,000 and €54,000 respectively.  Three individuals employed by Kühne that exercised leadership over the cartel arrangements would have been fined €22,500 and €135,000 if Kühne had not been the first party to approach the authority about the infringement.

If you would like to discuss any of these issues please do not hesitate to get in touch.