SeanPaul Brankin Crowell

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Buyer power remedies in different jurisdictions
Sean-Paul BrankinCrowell Moring May 22, 2008
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The UK

• CC Groceries Inquiry (2008)
• all large grocery retailers have buyer power
• excessive risk transferred to suppliers
• likely to lessen incentives to invest
• Remedies proposed
• Groceries Supply Code of Practice (GSCOP)
• builds on existing Supermarkets Code of Practice
  (SCOP)

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GSCOP

• Introduces
• coverage of all groceries retailers with 1 bil
  turnover
• fair dealing obligation
• automatic requirement for written record of terms
• prohibition on retrospective rebates
• prohibition on shrinkage
• duty to give notice of and reasons for delisting
• binding arbitration of disputes
• Ombudsman sought

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Austria and Portugal

• Market investigations find evidence of buyer
  power
• Austria 2007
• Portugal 2006
• No specific remedies imposed
• issues kept under review by both authorities

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Hungary

• Trade Act 2005
• prohibits abuse of significant market power (SMP)
• buyers deemed to have SMP where group turnover
  exceeds HUF 100 billion (about 4 billion)
• Examples of abuse include
• unreasonable restriction of suppliers access to
  trade opportunities
• unfair risk-sharing terms favoring the retailer
• unreasonable retroactive modification of terms
• unilateral imposition of listing fees

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Hungary (cont)

• First case Tesco shelf fillers
• Tesco reduced no of companies responsible for
  shelf filling from over 40 to 6
• concern that suppliers forced to use Tesco or its
  nominated service providers
• Tesco gave commitments to review process and
  charges to suppliers for shelf filling
• At least six other cases initiated

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Germany

• Statutory prohibition on extraction of
  unjustified benefits
• extended to all situations of economic dependency
  (as well as dominance)
• application to buyer-side issues clarified
• But
• extension of law to be repealed from 2013
• from then only SMEs will be protected in cases of
  economic dependency (all undertakings remain
  protected in case of dominance)

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France

• Recently repealed statutory prohibitions
• abuse of puissance dachat (buyer power)
• discriminatory terms of supply
• Other fair trading obligations remain
• eg, prohibitions on
• obtaining commercial advantages that are
  disproportionate or not linked to services
  rendered
• obligations that create significant inequality in
  the rights and obligations of the parties

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Will GSCOP be effective?

• Ombudsman important
• OFT responsible if no Ombudsman
• SCOP not a success
• Will it happen?
• CC currently consulting
• voluntary scheme seems unlikely
• legislative alternative
• limited time in this Parliament
• other Government priorities

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OFT attitude?

• OFT Report on SCOP (Aug 2005)
• Making the code of practice more prescriptive
  might well damage the efficient operation of
  the market
• Good practice by supermarkets around use of
  written terms will help We are not proposing a
  prescriptive, bureaucratic system since we
  recognise the dynamic nature of supermarket
  supplier relations

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If no Ombudsman

• OFT unlikely to be highly active enforcer
• limited resources/will
• Other changes will help
• clearer rules
• binding arbitration
• But pro-active enforcement unlikely
• guidance, education
• ex officio cases

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Closing remarks

• International remedies precedent limited
• GSCOP potentially a market leader
• Some uncertainty still around its effectiveness