Transcript UK Insolvency

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
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
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
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
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
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
Competition concerns from own
label supply
•
Access to information of suppliers - product launches,
pricing
•
Look-a-likes free riding on manufacturer’s investment
•
Discrimination in favour of own products
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
Other remedies / approaches
• Prohibition on predatory pricing, price discrimination
• Laws banning below cost sales
• Laws on dependency in trade relations
• Codes of practice
• Zoning
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
Combination of buyer power and
competitor role
•
Enhances buyer power
•
Weakens branded goods suppliers’ bargaining
positions
•
Unique? Packaged holidays, pay-TV?
UK supermarket practices related
to retailers with suppliers
Category of Practices covered by
Supermarkets CoP
Additional categories of practices
found to distort competition
Payments for access to shelf space
Imposing conditions on suppliers
trade with other retailers
Imposing an unfair imbalance of
risk
Imposing retrospective changes to
contractual terms
Imposing charges and transferring
costs to suppliers
Applying different standards in
different suppliers
Restricting suppliers access to this
market
Requiring suppliers to use third
party suppliers nominated by the
retailer
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)
Quasi-competition law remedies
•
Codes of practice
•
Significant market power (telecoms)?
•
Abuse of economic dependence (22% rule)?
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
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