💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

EU to scrutinise competition in food retail sector

Published 11/26/2008, 09:33 AM
Updated 11/26/2008, 09:36 AM

By Jeremy Smith

BRUSSELS, Nov 26 (Reuters) - EU regulators warned on Wednesday 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.

In a draft paper authored by the European Commission, the EU executive, they 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 will be presented for endorsement at a full meeting of the Commission next week.

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." (Reporting by Jeremy Smith, Editing by Peter Blackburn)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.