Following the French court case against Intermarché for possible abuse of power, retail organisations are reacting with concern: purchasing alliances promote competition and keep consumer prices down, they argue.
Price increases and supply restrictions
After news emerged that supermarket chain Intermarché is accused of abuse of power against brand suppliers, the European brand association AIM launched an appeal to the EU to start a more extensive investigation into the practices of retail alliance Agecore, not only in France but also in Germany, Italy, Spain and Belgium (where Colruyt Group is a member). The brand manufacturers denounce the business model of international buying groups: “Literally stopping orders and taking brands off shelves (de-listing) or threatening to do so if suppliers don’t pay up, has an anti-competitive effect on the market, the supply chain, and ultimately consumers lose out,” they say.
This is not to the liking of retail organisations EuroCommerce and Independent Retail Europe. Retailers operate in a limited number of countries and in a very competitive market, with high fixed costs and low margins of 1 to 3%, they say in a joint statement. Multinational brand suppliers, on the other hand, operate across the globe with margins that are up to ten times higher. Moreover, suppliers constantly propose price increases to retailers that have little to do with the product or the production costs. Alliances are therefore necessary and also help to mitigate the negative effect of territorial supply restrictions imposed by large branded suppliers, which sometimes lead to significant price differences within the European market.
Last year, a report requested by the European Parliament already concluded that retail alliances are not a source of unfair competition. “Buying alliances between retailers have become a key component of grocery supply chains. They can bring lower prices to consumers for food and personal care brands that they purchase daily,” said Commissioner Margrethe Vestager at the time.
