Trends in Retail Competition:

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• Trends in Retail Competition
• Private Labels, Brands and Competition Policy
• A Symposium on the Role of Private Labels in
  Competition
• between Retailers and between Suppliers
• The Institute of European and Comparative Law
• in conjunction with the Centre for Competition
  Law and Policy
• Oxford, 9 June 2005
• Sponsored by Bristows

CCLP (S) 03/05
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(No Transcript)
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Overview

• Competition concerns from buyer power
• Competition concerns from own label
• Current approach of competition authorities
• Combination of buyer power and competitor role
• Possible remedies

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Relevant market for grocery procurement

• Each different product or group of products
  constitutes
• a different product market (Ahold /
  Superdiplo)
• Grocery procurement market may constitute
  separate
• market particularly for branded goods
  (Carrefour / Promodes)
• Geographic market remains national but a wider
  scope
• cannot be excluded

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Buyer power

• Ability of one or more buyers, based on their
  economic
• importance on the market in question, to obtain
• favourable purchasing terms from their suppliers

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Competition concerns arising from buyer power

• Constant price erosion to level where lack of
  incentive
• for suppliers to invest
• Elimination of suppliers, wholesalers, smaller
  retailers
• Erosion of quality and choice for consumer

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Own label evolution

• From low cost alternative to branded goods to
  competing
• on quality and innovation
• Driven by retail competition - need to enhance
  retailers
• brand to retain customer loyalty

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Competition concerns from own label supply

• Access to information of suppliers - product
  launches,
• pricing
• Look-a-likes free riding on manufacturers
  investment
• Discrimination in favour of own products

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Competition authorities approach to date

• Consumers benefit from buyer power so long as
• intensive competition exists at retail level
  since this
• ensures benefits are passed on
• Unwilling to prohibit retailer practices that
  potentially
• offer efficiency benefits even if they serve
  to reinforce
• buyer power

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Other remedies / approaches

• Prohibition on predatory pricing, price
  discrimination
• Laws banning below cost sales
• Laws on dependency in trade relations
• Codes of practice
• Zoning

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But market power below dominance

• Power of retailer in buying comes from sheer
  range and diversity of products stocked
• For the supplier, the retailer represents a
  significant proportion of its overall sales for
  the retailer, the
• proportion may represent only a
  fraction of its turnover
• Consumers are more inclined to switch brands
  if preferred brand is unavailable, rather than
  switch stores

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Combination of buyer power and competitor role

• Enhances buyer power
• Weakens branded goods suppliers bargaining
  positions
• Unique? Packaged holidays, pay-TV?

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UK supermarket practices related to retailers
with suppliers

• Category of Practices covered by
• Supermarkets CoP
• Payments for access to shelf space
• Imposing an unfair imbalance of risk
• Imposing retrospective changes to contractual
  terms
• Imposing charges and transferring costs to
  suppliers

• Additional categories of practices found to
  distort competition
• Imposing conditions on suppliers trade with other
  retailers
• Applying different standards in different
  suppliers
• Restricting suppliers access to this market
• Requiring suppliers to use third party suppliers
  nominated by the retailer

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Competition law remedies

• Abuse of single firm dominance - local markets,
  
• tying consumers?
• Abuse of collective dominance - Air Tours test
• to be met
• Horizontal agreements - buying groups
• (Auchan / Casino)
• Vertical agreements - access to competitor
  information parallel networks (Hollywood
  Studios)

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Quasi-competition law remedies

• Codes of practice
• Significant market power (telecoms)?
• Abuse of economic dependence (22 rule)?

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Abuse of economic dependence

• Undertaking in position to determine excessive
  imbalance in rights and obligations in its
  business dealings with another
• Specific contractual relations
• To be evaluated in light of the possibility to
  find alternative outlets
• Abuse may consist of
• Refusal to sell or buy
• Imposition of unjustifiably burdensome or
  discriminatory contractual conditions
• Arbitrary interruption of commercial dealings

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Conclusion

• Issue acknowledged by authorities - competition
  law and
• quasi-competition law remedies
• Balance may be tipping to retailers
• Market power below dominance
• Where consumer detriment, further development
  of tools
• where competition law does not apply