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Curbing Retail Power Abuse: Irish Groceries Plan

Explore the abuse of buyer power in the Irish retail chain industry, impacting suppliers and job losses. Learn about proposed solutions such as a Code of Practice and a Grocery Ombudsman, derived from the UK model. Examine the implications of the Competition (Amendment) Act 2006 and the effectiveness of an Ombudsman compared to legislative action. Discover the challenges faced in addressing buyer power, including restrictive planning laws and strategic trade diversion tactics. Dive into the "IKEA Effect" and its impact on Irish retail market entry.

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Curbing Retail Power Abuse: Irish Groceries Plan

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  1. Retail Chains – Abuse of Buyer PowerThe Irish Experience William Prasifka Chairperson, The Competition Authority 11 November 2009

  2. 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

  3. 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

  4. 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

  5. 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

  6. Our Experience Competition (Amendment) Act 2006 never been used • Few complaints • Anecdotal fear of coming forward • No private actions Will an Ombudsman change this?

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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 ?????????

  12. The IKEA Effect

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