Retail chains abuse of buyer power the irish experience
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Retail Chains – Abuse of Buyer Power The Irish Experience. William Prasifka Chairperson, The Competition Authority 11 November 2009. Grocery Reports. The Grocery Monitor Project Report 1: The Structure and Operation of Grocery Retailing Report 2: Price Trends

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Retail Chains – Abuse of Buyer Power The Irish Experience

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Retail chains abuse of buyer power the irish experience

Retail Chains – Abuse of Buyer PowerThe Irish Experience

William Prasifka

Chairperson, The Competition Authority

11 November 2009


Grocery reports

Grocery Reports

The Grocery Monitor Project

  • Report 1: The Structure and Operation of Grocery Retailing

  • Report 2: Price Trends

  • Report 3: Retail Planning System

    Retail-related Import and Distribution Study


The problem

The Problem

  • Buyer Power

    • Retailers are moving supply to the UK

    • Unfair demands are squeezing suppliers

    • Allegations of millions in hello money & slotting allowances

  • Fear of consequences

    • Delisting

    • Job Losses

      “The forced payment of up to €160m in ‘Hello Money’ to large supermarket chains by Irish suppliers is jeopardising thousands of Irish agri-business jobs”

      Member, Irish Parliament


The solution

The Solution

Proposal to introduce:

  • Code of Practice in Ireland

  • Grocery Ombudsman

  • Based on the UK Model

    Key Objective : Protect Suppliers from

  • Unfair Practices

  • Hello Money & Slotting Allowances


Current legislation

Current Legislation

The Competition (Amendment) Act 2006 prohibits

  • Imposing resale price maintenance

  • Apply dissimilar conditions to equivalent transactions

  • Slotting allowances

  • Hello Money

    These prohibitions are subject to a competition test


Our experience

Our Experience

Competition (Amendment) Act 2006 never been used

  • Few complaints

  • Anecdotal fear of coming forward

  • No private actions

    Will an Ombudsman change this?


Uk experience

UK Experience

Different competitive dynamics

  • EDLP v’s High/Low pricing

  • Shoppers travelling to Northern Ireland – not vice versa

    Has the UK Supermarket Code been effective?

  • Fear among suppliers

  • Failure to use the code to resolve disputes

  • Few cases mediated


Ombudsman v s act

Ombudsman v’s Act

  • No Competition Test

  • No new incentive to come forward

  • Costly

  • Has little power

    The Code will “do a lot of harm by trying to do a little good”

    ESRI


Buyer power

Buyer Power

If this is the problem, what is the solution?

Changing the rules - Regulation? Ombudsman?

Will Result in:

Those with buyer power changing behaviour

  • Find alternative methods of “squeezing”

  • Encourage trading with non-Irish suppliers


Buyer power1

Buyer Power

Only effective remedy is new entry

But…

Irish planning laws restrict entry

  • Maximum retail floorspace caps

    • Grocery Store: 3,000/3,500 m2

    • Discounters (ALDI/Lidl): 1,000/1,500 m2

  • Trade Diversion Test

  • Process used strategically to frustrate competition


The ikea effect

The IKEA Effect

Attempts to enter Irish market

  • Planning issues - Restricted due to floorspace caps

  • 2005 Caps lifted for non-food stores in certain areas

  • 2006 IKEA Planning application

  • 2007 Planning permission granted

    Finally opened 27 July 2009

    And Then What Happened ?????????


Retail chains abuse of buyer power the irish experience

The IKEA Effect


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