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EU to scrutinize competition in food retail sector

EU regulators warned Nov. 26 of a risk that consolidation in the food retail sector might act against the interests of consumers and producers, saying a close watch should be kept on uncompetitive behaviour.

A draft paper authored by the European Commission called for case-by-case screening of a string of retail practices that could be seen as restrictive – including a review of shop opening hours in different EU countries.

“Reforms improving the functioning of the food supply chain could contribute to preserve the purchasing power of households and raise the competitiveness of the agricultural, food processing and distribution sectors,” the paper said.

The document was to be presented for endorsement at a full meeting of the Commission.

Given the present depressed economic circumstances, “downwards price movements should be transmitted to consumers without delay and every effort should be made to exploit untapped efficiencies along the food supply chain,” it said.

While consolidation in the food retail sector could lead to greater efficiency and lower prices, national competition authorities still needed to ensure that consolidation did not worsen local competition conditions to the detriment of consumers and producers, it said.

The European Union market for food products was still fragmented due to national differences in regulation that hampered its functioning, it said, singling out differences in regulations on pricing, market entry and shop opening hours.

It also warned national EU competition authorities to keep a close eye for hints of cartel-like activity in the food chain.

“Recent experience shows that cartels can occur in the food sector and that they are of varying territorial scope,” it said.

“Special attention should be given by competition authorities to uncovering the most harmful cartels amongst food suppliers and retailers,” it said, recommending closer scrutiny of a string of retail practices.

These included joint purchasing agreements, which the Commission said could be efficient due to their economies of scale but also had the potential to obstruct rivals’ access to essential materials at competitive prices.

Other practices singled out for scrutiny were single branding obligations, exclusive supply arrangements and resale price maintenance – restriction of a buyer’s ability to determine the sale price to end-consumers – and deceptive advertising, particularly on prices, the Commission said.

“At a time of sharply fluctuating food prices, the risk of misleading price advertising increases,” it said.

“For example, consumers may be misled by suppliers altering pack size or contents in order to apparently maintain the same price for the relevant product. It is particularly important for consumers to be able to compare the unit price accurately.”

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