EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 28.10.2009 
SEC(2009) 1449 
COMMISSION STAFF WORKING DOCUMENT 
Competition in the food supply chain  
 
Accompanying document to the  
 
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
A better functioning food supply chain in Europe 
  
{COM(2009) 591 final} 
 
EN 2   EN TABLE OF CONTENTS 
1. Introduction................................................................................................................ .. 3 
2. Preliminary Observations on the Structur e of the European Food Supply Chains...... 4 
2.1. The supply chains of non- proces sed food (agricultural produce)............................... 4 
2.2. The supply chains for processed food.......................................................................... 6 2.3. The retail sector......................................................................................................... ... 8 
3. Gap between producer prices  and consumer prices ..................................................... 9 
3.1. Addressing the perception of high fo od prices in absolute terms .............................. 10 
3.2. Price formation........................................................................................................... 11 
3.3. Price stickiness as assessed by stakeholders .............................................................. 13 3.4. Milk: a case for urgent action..................................................................................... 14 4. Practices specific to food supply chains..................................................................... 16 4.1. Preliminary considerations on th e concept of "buyer power".................................... 17 
4.2. Retail-driven practices ............................................................................................... 18 4.3. Supplier-driven practices ........................................................................................... 25 4.4. Other practices linked to unfair trading ..................................................................... 27 5. Conclusions................................................................................................................ 2 8 
 
EN 3   ENCOMMISSION STAFF WORKING DOCUMENT 
Competition in the Food Supply Chain 
1. INTRODUCTION  
Following the unprecedented price hikes of  2007-2008, the European Commission has 
set up a Task Force to analyse the func tioning of the European food supply chain. 
Although in 2008 the prices of cer tain commodities started to decline, the absence of a 
swift downward price trend has raised con cerns regarding possible malfunctions of 
the European food supply chain. From a co mpetition policy pers pective, questions 
arose regarding the competitive structure of food markets and the regulatory hurdles 
that market entrants may face. Against this  backdrop, key questions relate to the need 
to understand whether: (i) c oncentration in the food supply chain is more problematic 
than in other sectors, (ii) the food supply chain is prone to price stickiness and (iii) 
such alleged stickiness can be linked to competition shortcomings. 
In this context, the Commission was give n a mandate to improve its knowledge of 
food markets - both of processed food and non-processed agricultural products. To 
this end, DG Competition has carried out a Stakeholder Survey construed around a series of informal discussions with a sele ction of representative associations of food 
producers, processors, traders, wholesalers and retailers between April and July 2009 
in Brussels. These associations were chosen across several product markets and 
sectors, in an attempt to grasp the specifici ties of different supply chains (e.g. cereals, 
breakfast cereals, milk and dairy, livestock and meat pr ocessing, pasta, confectionery, 
branded foodstuffs and beverages, fruit a nd vegetables, oils a nd oilseeds, sugar, 
poultry and eggs, etc.). The obj ective of these meetings was to obtain insights into the 
main stages and sectors that compose the overall European food supply chain, 
touching upon a number of economic developmen ts that have char acterised specific 
sectors of activity in recent years. This ex ercise further aimed at  identifying potential 
competition-related concerns that may affect  the functioning of food markets, to the 
ultimate detriment of European consumers.  
In parallel, the Commission strengthene d its dialogue with National Competition 
Authorities (NCAs) on food rela ted issues. Three meetings with NCAs were held in 
Brussels in July and November 2008, as  well as in July 2009. These meetings 
punctuated a continuous flow of inform ation between Competition Authorities 
throughout the EU on recent enforcement,  monitoring and advocacy initiatives 
undertaken at national and EU level on food markets
1. In particular, this information 
exchange focused on a number of specific prac tices that occur with relative frequency 
in the food sector. Apart from hardcore rest rictions of competition such as cartels and 
resale price maintenance, some practices ha ve been singled out as potentially harmful 
for competition. Such practices, which may thus merit a closer assessment, always on a case-by-case basis, relate mainly to  joint purchasing agreements ("buying 
alliances"); joint selling agr eements; brand exclusivities including tying and bundling; 
and increased use of private labels.  
                                                
 
1 To facilitate information exchange, DG Competition circulated several Questionnaires to 
Member States to which the NCAs promptly replied to over the course of 2008/2009. 
 
EN 4   ENThe present paper is based on the main  findings and key messages flowing from 
the Stakeholder Survey and from a numb er of specific written contributions 
submitted by NCAs over the last year. 
2. PRELIMINARY OBSERVATIONS ON THE STRUCTURE OF THE EUROPEAN 
FOOD SUPPLY CHAINS  
All the stakeholders and NCAs  interviewed agree that a single "European food supply 
chain" cannot be defined or identified gi ven the wide variety of agro-food products 
and the diversity of actors operating on food markets. Supply chains differ according 
to product, geographic and even seasonal markets in some cases. To reflect such diversities, an important distinction need s to be made between non-processed food 
(agricultural produce, perishable) and processed food (stockable). 
2.1. The supply chains of non- proce ssed food (agricultural produce) 
The non-processed food sector is  mainly characterized by a very fragmented structure, 
with a great number of supplie rs and intermediaries that intervene at various stages. 
The length and complexity of this type of  chain implies a number of structural 
inefficiencies often coupled with low productivity. Produ cers are the least 
concentrated sector in the food supply ch ain, which leaves them at a comparative 
disadvantage in terms of barg aining power (for example,  in France there are around 
87000 enterprises that produce fruits and vegetables
2). Such suppliers are often unable 
to build a critical mass in terms of volumes and lack an efficient and speedy delivery 
infrastructure that would allow them to  supply ranges of products within a given 
category, enabling them to sell directly to re tailers or at least to rationalise the supply 
chain. This type of supply structure is perc eived as archaic in comparison to modern 
retail trade and is often unprepared to meet  consumer demand directly. Due to this 
fragmented structure and lo w efficiency in their marketing operations, farmers are 
often unable to enter into more direct negotiations with their retail counterparts. The 
agricultural produce is thus, in many cases , purchased and re-sold by a number of 
intermediaries before it can reach shop shelves.  Even when producers join forces in 
producer organizations (POs), wide differen ces exist across Europe as to the strength 
of such organizations. For example, in 2003, while in the Netherlands and Belgium 
more than 70% of all fruit and vegetable production was marketed through POs, the 
percentage was significantly lower in th e three most important producing Member 
States: less than 30% for Italy, 50% for Spain and 55% for France3. This explains why 
an important number of intermediary operato rs intervene in such  supply chains. In 
Italy, for example, according to the findi ngs of the Italian Competition Authority4, up 
to 4 different intermediary operators inte rvene in the fruit a nd vegetables supply 
chain5. Moreover, for each region and each product chain, fresh products go through 
                                                 
2 " Les modalités de formation des prix alimentaires: du producteur au consommateur", Rapport 
Lambert, France, 2009 
3 DG Agriculture Factsheet on Horticulture, 2003, available at: 
http://ec.europa.eu/agriculture /publi/fact/horti/2003_en.pdf. 
4 Italian Competition Authority Inquiry into the fruit and vegetables markets, June 2007 
5 Moreover, there are important differences between  fresh product chains in terms of the part 
that the agricultural product itself represents in  the final price. For example, in Spain for 
apples and pears, the origin producer price (expressed in percentage of the activity of the producer of origin into the end price) represents around 29-41% of the end price. For 
clementines and lemons, it is around 28%, for beans it is 57% whilst for onions it is 17%. 
 
EN 5   ENdifferent handling, transport and pack ing phases which all incur costs6. At each 
intermediary level, margins are added wh ich impact on the end-price of products. 
Such intermediaries act as a filter in  price transmission to end-consumers.  
Broadly speaking, and leaving aside the pu rchases made by governmental marketing 
boards, an agricultural product may pass thr ough a number of different marketing and 
distribution channels before reaching the ultimate consumer: 
– in the shortest supply chain, wh ich is an exception since larger 
operations are still difficult to develo p, the product may be sold directly 
to the consumer if the producer himself sells at the farm gate or in a local village market or to local retailers (e.g. organic vegetables); 
– it may be sold to a wholesaler who will then resell to any of the buyers 
mentioned above either directly or through other wholesalers or 
middlemen such as traders (e.g. cereals); 
– in some sectors, producers have shown capacity to concentrate and 
have extended their geographic f ootprint accordingly, through the 
strengthening of producers organisa tions and cooperatives (e.g. milk 
sector in Northern Europe; for exam ple in The Netherlands, Friesland 
Campina controls 80% of the milk collection and processing
7); 
– in some long supply chains, which involve some primary forms of 
processing, the product can go through a large number of phases over a 
relatively long period of time (e.g. fo r the meat supply chain, cattle is 
first bred, then sold to fatteners, then to slaughterhouses, after which it 
can go through a de-boning plant, and to successive cutting and packaging stages, before reaching shop shelves);  
– moreover, important regional specific ities intervene in price formation, 
per product chain. For example, in Fr ance, for pork, producer prices are 
determined by the exchanges on th e Marché du Porc Breton; this 
market represents only 10% of the French pork transactions; however it 
gives the price orientation for the entire territory
8. For French beef, 
prices are formed on a weekly basi s mostly by the confrontation of 
offer (75 POs, 2500 private negotiat ors) and demand (370 slaughtering 
/deboning/processing houses)9. 
It must be recalled that for unprocessed food chains, intermedia ries tend to exercise an 
aggregation function, by bringing together several varieties of the same product or 
complementary products to meet the needs of retail trade. This function is not fulfilled 
by producers directly and partly expl ains the length of the chains. 
It appears evident that the farmers who need to sell their fresh produce over a limited 
number of days (e.g. the life span of a salad is about 3 da ys), are under more pressure 
to accept lower prices from thei r buyers in order to avoid the loss of their crop. On the 
                                                 
6 " Análisis de la cadena de valor y de la formación de precios en los productos frescos ", Cap 
gemini/ Ernst & Young, Asociación Española de Distribuidores, Autoservicios y 
Supermercados, 2004. 
7 " Formation des prix alimentaires ", rapport Besson, Fr ance, December 2008. 
8 UECVB (European livestock an d meat trading union) data. 
9 See footnote 8. 
 
EN 6   ENother hand, stockable produce, such as cerea ls, can be stored longer by producers and 
thus sold at more advantageous prices. 
Overall, the non-processed food supply ch ains are characterised by atomised 
weaker suppliers and stronger buyers, who are often intermediary operators and 
rarely retailers. Such buyers are the ofte n “unavoidable” trading partners for 
producers. Agricultural producers feel co mpelled to satisfy terms and conditions 
stipulated by their buyers – and that farmers often perceive as going beyond 
what is "fair" – so as not to lose these indispensable buyers. 
The non-processed food chains are thus characterised by a form of structural 
archaism. Many historical factors, as well as intrinsic characteristics of the 
agricultural production process, may h ave influenced the structure of non-
processed food chains and may have co ntributed to sheltering farmers from 
market pressures. In particular, in some specific sectors there has been no real 
integration of farming assets, and no dy namic search for enhanced cooperation 
between farmers at downstream stage s of the supply chain, except for 
cooperatives that have developed at different speeds across Europe. Given the 
farmers' difficulties in aggregating their o ffer, there is still an intrinsic need for 
autonomous market players to perf orm an aggregation function. These 
numerous layers of intermediaries thus  act as a bottleneck and may influence 
negatively price transmission to end consumers. Since 1992, the Common 
Agricultural Policy (CAP) has been going through a reform process with the 
objective of helping farmers to better respond to market signals and to face new 
challenges, whilst improving their incen tives to develop more innovative and 
more market-oriented business models. 
Given the wide differences between Member States and sectors and the 
impossibility to draw common conclusion s across regions and product markets, 
future analysis should fo cus on those markets which present both a highly 
fragmented structure in terms of the num ber of intermediaries and stages along 
the chain, and a high level of concentrat ion at certain of these stages. This would 
seem to be the case in particular for certain unprocessed sectors, key to 
consumers, such as milk (e.g. as announ ced by the Communication on the Dairy 
Situation of 22 July 2009), fruit and vegetables, meat and fish.  
Issues related to a potential malfunctioning of this type of supply chain appear to 
be mainly linked to structural inefficien cies resulting in contractual tensions 
between weaker suppliers and stronger buy ers. This has been confirmed by the 
recent experience of a number of NCAs (e.g. Hungarian NCA study of 2007 on 
the relationship between large retailers and their suppliers; Slovak NCA inquiry 
into retail chains; Greek investigation on the tomato sector). Such considerations 
are further detailed in S ection 4 of this paper. 
2.2. The supply chains for processed food 
The supply chain for processed food is char acterised by more direct negotiations 
occurring between producers and retailers,  sometimes through the vehicle of buying 
groups. The food industry is more concentrated  than agricultural suppliers, especially 
if large industrial multinationals are consid ered. For example, on the French breakfast 
cereals market, in 2007, Kellogg's held a 44.1% market share, Nestlé a 26.7% share 
 
EN 7   ENand Jordan's a 4.9% share10, which implies a 75.7% share for the top 3 suppliers. 
Similar high market shares were reported fo r the Spanish soft dr inks market (top 3 
suppliers having a market share nearing 90%),  beer (the top 3 suppliers amounting to 
75% of the market) and pizza market (the top 3 producers nearing 75% of the market) 
in 200511. As recalled by the High Level Group on the Competitiveness of the Agro 
Food Industry, a nuance needs to be brought to  such figures to recall that a great 
number of SMEs are also active in the European agro-food industry12. These 
companies are for example active in the pr oduction of secondary brands or niche 
products, and introduce competition on the market  in terms of variety and price. When 
negotiations occur between retailers and la rge multinational suppl iers, who are often 
producers of a portfolio of goods which are in some cases must-carry brands, suppliers may have significant market power . In such cases, the buyer power of even 
the largest retailers may be offset by the market power of the suppliers
13. The profit 
margins of such “unavoidable ” suppliers are generally high er than those of retailers. 
As an illustration, on average in 2006, the average net profit margins of European 
retailers were around 4%, whereas these same  margins in the case of The Coca-Cola 
Company and the Group Danone were  around 20% and 11%, respectively14. These 
differences in profitability can be explaine d by the fact that retailers compete mostly 
on price-related criteria wh ereas branded good producers compete on other factors in 
addition to price including brand image, pr oduct characteristics, consumer preferences 
for special flavours, etc. Furthermore, in the processed food and drinks industry, 
concentration has occurred earlier and some of the leading brands  are supplied by a 
very small number of producers15.  
This inversed balance in bargaining pow er has contributed to an increased 
concentration of retailers and the devel opment of buying platforms destined to pool 
purchase volumes together so as to negotiate better terms from such suppliers (See 
Section 4.2). It appears that only when s uppliers are producers of complementary 
products, private labels or niche products, retailers can exert stronger buyer power 
within the processed food sector. 
The processed food supply chains are ch aracterised by the interplay between a 
relatively concentrated food industry h aving significant market power and the 
retail sector. Negotiations occur, for most  operations, directly between suppliers 
and retailers. When suppliers are produ cers of "must-carry" brands, suppliers 
tend to hold a stronger bargaining po sition than their retail counterparts. 
According to retailers, they conseque ntly make lower margins for such 
                                                 
10 Data from AC Nielsen as supplied by Euro commerce (Retail, Wholesale and International 
Trade Representation to the EU). 
11 Eurocommerce research. 
12 Available at: 
http://ec.europa.eu/enterprise/newsroom/cf/it emshortdetail.cfm?item_id=2954&lang=en&tpa_
id=156. 
13 UK Competition Commission Grocery Inquiry, 2008, available at: http://www.competition-
commission.org.uk/inquiries/ref2006/grocery/index.htm  
14 Data provided by Eurocommerce, Source: De loitte, Global powers of the consumer products 
industry, fiscal year 2006. 
15 According to data presented by Eurocommerce, in Spain the top 3 retailers cover 56% of the 
market, whereas the top 3 soft drinks producers cover 87% of the market. 
 
EN 8   ENproducts16. A significant number of SMEs are also active in agro-food industries 
and contribute to the complex structure of the processed food chain. In this last 
case, the bargaining position could be the opposite, with the suppliers in a 
weaker position than the retailers. 
Issues relating to possible malfunctions of this type of supply chains may raise 
competition-related concerns. Such potent ial concerns are tackled in detail in 
Section 4 of this paper.  
2.3. The retail sector  
The retail sector has followed an intense concentration trend ove r the last 20 years, 
hence the recurring image of  retailers as gatekeepers to mass consumers. Data 
provided by stakeholders as well as by most NCAs converge to show that 
concentration ratios in the retail sector  are high in many Memb er States (e.g. the UK 
top 4 retailers account for 65%  of the market, the Finish top 2 retailers for 75%, the 
Latvian top 2 for 60%, the Dutch top 3 fo r 83%, the Slovenian top 3 for 63%, the 
Portuguese top 5 for 63%, the German top 5 fo r 90% etc; and in general the majority 
of NCAs define these market s as "oligopolistic"). Howeve r, there are also Member 
States which present a more atomised and not  so concentrated food retail sector. Such 
would be the case, for instance, of Greece (where the 10 largest retailers account for 
78.5% of the total sales) and Romania (w here the top 10 retailers would have a 
combined market share of only 19% of the market).  
Despite the high concentration ratios, it is essential to emphasise  that stakeholders 
agreed that the retail sect or is fiercely competitive.  Supplier associations have 
unequivocally confirmed this statement in the course of the fact-finding exercise 
carried out by DG Competition, a nd further empirical data provided in this context 
strengthens this assertion17. It is interesting to note that  NCAs have not quoted in their 
latest enforcement actions any case sanctioni ng retailers for taking part in horizontal 
anti-competitive agreements or  abuses of dominance. This may corroborate the view 
that the retail sector is generally competitive. Retailers engage in frequent “price wars”, and this intense competition maintains a high pressure on them to deliver better prices for consumers. Such pressure may also  have contributed to keeping retail price 
increases below general inflation (e.g. a ccording to data presented by the retail 
sector
18, in Belgium, over the last 25 years the average yearly retail price increase has 
been of 1.47% whilst average yearly infl ation was of 1.99%). This pressure is 
furthermore reflected on the net operating marg ins of retailers (broadly speaking such 
operating margins should be seen in conjunc tion with the business models of modern 
retailers). For example, the net operational margins of certain large retailers in 2006 
                                                 
16 Eurocommerce and ERRT (Europ ean Retail Round Table ) data. 
17 CPB Netherlands Bureau for Economic Policy analysis, April 2008. The study on the Dutch 
retail sector reaches the conclusion that “( …) competition on these markets seems to have 
become tougher and mark-ups lower over time (1995-2005). Furthermore, no significant 
empirical indications (were found) that supermarkets were able to use their buyer power to 
shift profits from manufacturers to supermarkets after 1993. Finally, (…), in terms of welfare, 
consumers have benefited from fiercer competition in terms of lower prices .” For example, 
branded goods producers as represented in the CIAA (Confederation of Food and Drink 
Industries of the EU) and Livestock Meat trad ers such as UECBV reported that retailers 
fiercely compete on prices downstream. 
18 Eurocommerce. 
 
EN 9   ENwere as follows: Auchan France (4.3%), Carrefour France (4.6%), Casino France 
(4.7%) and Tesco UK (6.4%). Further data provided by retailers shows that for the same year, the real net margin of Italian retailers was of around 2.2%. It appears that 
concentration ratios do not prima facie aff ect price competition and that European 
consumers generally reap the bene fits of this retail competition. 
Moreover, European consumers are increasingly shifting from the traditional “one-
stop-shop” approach for their weekly gr ocery shopping and now visit more than 3 
shops on average for their food purchases
19 (modern trade supe rmarkets, discounters 
or alternative distribu tion channels). This seems to sugge st that there is increasingly 
intense competition between different retail formats. The rise in single person households, the growing number  of working women and changes in traditional family 
structures, coupled with a “back-to-to wn” phenomenon amounting to the re-
population of urban centres has led cons umer preference towards convenience 
proximity stores
20 (e.g. in Belgium, Proxy Delhaize). Rather than rolling out more 
supermarkets in an already saturated market, retailers have recently  started developing 
new formats aimed at the general public an d also at various consumer niches. These 
niche markets include bio/organic shops, stor es aimed at providing proximity services 
or responding to the demand from low in come households focused on cheap ready 
made meals, etc. Analysts believe that such  trends will be conf irmed in coming years 
and lead to more fragmentation of consumer experiences in retailing21. NCA 
experience confirms this emerging trend, though with regional differences. However, 
this is not always synonymous  of increased competition si nce a large numb er of such 
stores are owned or franchis ed by the same large groups. 
One of the key findings of the current exercise is that competition at retail level is 
fierce, both between retailers themselv es and increasingly between different 
retail formats. This has also translated  into lower net operating margins for 
retailers (e.g. according to data presente d by the retail sector , retail margins are 
on average around 4%, even lower on fresh produce where they near 2%)22 and 
has contributed to cheaper prices for consumers on the long term. 
Such findings seem to contradict wide-sp read perception that retailers currently 
have the highest margins in the food supply chain.  
3. GAP BETWEEN PRODUCER PRICES AND CONSUMER PRICES  
In the context of the soaring agricultural  commodity prices of 2006-2008 and of their 
more recent downward trend since, much of  the political debate has been focused on 
                                                 
19 Statement confirmed by branded goods producers represented in CIAA. 
20 Institute for Grocery Distribution, European Private label growth: strategic responses for 
suppliers and retailers, 2006. 
21 2008 Global Powers of retailing, Deloitte. The study mentions the new trend of “long tail” 
retailing: “ As a result of IT improvements, it is now possible to operate a portfolio of small, 
targeted businesses just as efficiently as one  large business. Hence retailers seeking growth 
can invest in new businesses along the long tail (smaller income) rather than expanding 
existing mass market formats ”. 
22 " Marges distribution-industrie sur 10 ans ", Natixis.A, September 2007, provided by 
Eurocommerce. 
 
EN 10   ENtwo key issues: (a) the overall high prices of food and; (b) potential price stickiness in 
the food supply chain. 
Public perception has been, and to a certain extent continues to be, that food prices 
have increased more than other consumer  goods and that they  are generally too 
expensive. Price stickiness would be defi ned as the phenome non of end consumer 
prices remaining high, despite the declining price of agri cultural inputs. This would 
mean that farmers receive lower prices for their products, but in the same time 
consumer prices do not decrease. Such a phenomenon would thus indicate that the 
benefits deriving from cheaper agricultura l produce are not passed onto consumers by 
means of cheaper food, and that profits are ca ught at certain stag es of the food supply 
chain. In order to tackle such concerns a number of preliminary remarks must be 
made.  
3.1. Addressing the perception of high food prices in absolute terms 
Household expenditure on food remains very important at EU scale and ranges from 
9.06% in the UK to 41.87% in Romania23. It is however importa nt to recall that over 
the last three decades, food inflation has remained below general inflation. Furthermore, even in the current context a nd in the aftermath of rising food prices in 
2007/2008, a certain nuance needs to be added to the general perception that food is 
too expensive. For example, 500g of pasta co st around €1 in Italy (average 4 servings 
amounting to 0.25 € per portion
24), which is less than the price of certain packets of 
chewing gum. Further data show that a French consumer spends on average €0.90 a 
day to buy 600g of fruit and vegetables. To support the above assumptions, Interfel25, 
the French fresh fruit and vegetables in ter-branch organization, recently launched an 
information campaign aiming to correct the public’s perception that fruit and vegetables are too expensive. The campaign’s objective was to stimulate consumption in a context of an exacerba ted debate on the excessive pricing of fresh produce.  
It is also important to note that Europ ean consumers increasingly favour the purchase 
of processed foods in light of the require ments of modern life.  Such food is often 
more labour-intensive and other factors su ch processing, refrigeration, transport and 
advertising etc., all influence its end-price. Expensive input s such as energy should be 
taken into account in this an alysis: it seems that in the 2007 food crisis so aring energy 
costs have contributed significan tly to the rise in food pric es. To the contrary, it may 
be useful to recall that, esp ecially for processed food, the co st of agricultural input in 
the total end-cost is rather minimal. A simple  example that is often quoted is that of a 
bread baguette: for an end consumer price of €1 .00, wheat amounts for €0.05 of grain 
                                                
 
23 Commission Communication on "Tackling the challenge of rising food prices; Directions for 
EU action"  of May 2008, COM(2008)321. 
24 According to data provided by UNAFPA (Union of Organisations of Manufacturers of Pasta 
Products of the EU) and CONAD Italia. According to data provided by the Italian pasta 
industry, the "unavoidable" price raise of 20 07-2008 increased the overall pasta expense per 
capita in Italy by less then €8 per year. 
25 See http://www.interfel.com/fr/le-prix/ . The campaign used slogans such as “ 1 espresso = 
1litre of home-made soup ”. It further reminded consumers that fresh produce is priced higher 
only when demand is for produce that is not seasonal. 
 
EN 11   ENex-farm26. Furthermore, for branded goods, the cost of marketing sometimes 
represents as much as 50% of  the end-price of the product.  
Such examples indicate that the public may need further in formation about the 
pricing of food, so as to correct the p erception that food is too expensive in 
absolute terms, across products, regions and seasons.  
3.2. Price formation 
A better understanding of price formation (and relevant costs incurred at every step of 
the food supply chains) is crucial before asse ssing whether price stickiness has indeed 
occurred in Europe in th e aftermath of the food cris is of 2006-2008. In particular, 
price formation should be assessed against the backdrop of the structure of the 
different supply chains (as detaile d in Section 2 of this paper). 
A number of external factor s (e.g. international commodity markets, futures markets, 
weather conditions etc.), as well as internal factors (e.g. number of intermediaries, 
market structure.) contribute to price forma tion at each level of the supply chains. For 
instance, the producers and traders of agricultural commodities27 mentioned 
commodity prices are by nature volatile , given their diffe rent production and 
consumption patterns. Indeed, grains are harvested once a year, whilst they are 
consumed/used throughout the whole year. Between the signature of a commodity 
purchasing contract and the consumption of the final manufactured product, a two 
year cycle can be considered as normal. Prices for the same harvest may vary depending on demand/supply at the time of pur chase. Prices of grains depend (apart 
from international demand and supply for the commodity as such) on a multitude of 
other factors such as freight and exchange  rates and final prices of other products 
(inputs) such as seeds, fertilizers, ener gy and plant protection products. As some of 
the latter are purchased by farmers months in advance of sowing (for fertilizers about 
6 months from purchase to arrival on farm can be counted), supply prices impacting 
on grain prices do not coincide with the co mmodities’ market prices (spot prices) at 
the time of planting or harves t. It seems that fluctuations of international commodity 
markets may have a significant influence as regards price formation for certain 
products.  
These international markets should be differe ntiated from other, more local, reference 
markets which appear crucial in setting the prices of certain fresh products. For 
certain products, it seems that the first st age in price formation occurs at wholesale 
level, and not at production leve l. In terms of price formation in the fresh/ perishable 
supply chains, the DG Competition survey found that "after-sales price setting
28" 
occurs quite frequently. This term refers  to a marketing technique whereby producers 
sell their produce to clients (wholesalers/ other intermed iaries/ retailers) without 
knowing the price which they will receive from  such buyers. The price is thus set after 
the buyer has, in turn, concluded the resa le of the produce to his downstream buyers. 
This practice is highly controversial and l eads to tensions between market players 
                                                 
26 Example quoted by COCERAL (Committee of cereals, oilseeds, animal feed, oil and fats, 
olive oil and agrosupply trade of the EU). 
27 COCERAL. 
28 "Prix après vente". 
 
EN 12   ENsince it allegedly drives the prices paid to producer s downwards. Consequently, 
situations occur where at the end of the cy cle, the producer receives a price which is 
lower than his production costs. It appears that this practice seems unavoidable in a 
number of Member States (e.g. Spain, Belgium,  Italy to name a few), especially since 
it is applied for highly perish able products where the merchandise must be passed on 
rapidly (examples of products that were quoted in the cont ext of the practice at stake 
were fruit and vegetables, but  also meat, though the practice may be frequent in more 
product chains). 
As mentioned in Section 2, in long supply chains, each operator adds a mark-up at 
every step which is reflected in the fina l price of products. The existence of a high 
number of intermediaries impacts on the pri ces paid to producers: it seems that the 
longer the chain, the lower the price paid to producers. According to data presented by 
the Italian Competition Authority29, the share of the end price collected by a producer 
would pass from 60% in a scenario where the pr oducer sells directly to the retailer, to 
30% in a situation in which 3 intermediari es operate between the same producer and 
retailer, in that product chain.  
The above considerations might partly explain the differences between producer 
prices and end-consumer prices. This asser tion seems to be supported by research in a 
number of Member States and product ma rkets, which suggests the existence of 
common monitoring and investig ation patterns among Member States as regards food 
price formation issues. Indeed, a number of Member States have set up a series of pricing monitoring tools and observatori es (Bulgaria, Czech Republic, Denmark, 
Finland, France, Greece, Latvia, Poland, Portuga l, Slovakia, Slovenia, Spain) or have 
assessed the gap between producer/ consumer  prices for certain products (Denmark, 
Estonia, Hungary, France, Greece, Latvia, L ithuania, Spain, Slova kia, Slovenia). To 
date no NCA has found that this gap is directly linked to any competition 
infringements. Indeed, factors mentioned by NCAs as contributing to such gap are of 
structural or external nature, such as th e number of intermediari es operating in the 
supply chains, the specific characteristics of  the products, global price increase trends, 
higher raw materials purchase prices, or  increasing labour, en ergy, production and 
marketing costs. 
Price formation follows complex pattern s in all supply chains. Transparent 
information on the structure of price fo rmation should be further gathered by 
the Commission and Member States' Auth orities in order to have a better 
understanding of the mechanisms and crit eria currently used to determine food 
prices. This exercise would also allow a ll the stakeholders involved in the supply 
chain, as well as consumers, to have a more transparent overview of price 
formations mechanisms30. 
                                                 
29 Italian Competition Authority inquiry into the fruit and vegetables supply chain, June 2007. 
30 Representatives of the supply sector such as COPA-COGECA, CIAA, CEFS (European 
Committee of Sugar Manufacturers) etc and of  the retail sector such as ERRT and 
EUROCOMMERCE would see this as useful. 
 
EN 13   EN3.3. Price stickiness as assessed by stakeholders 
A number of explanations were provided to  explain why consumer prices have not 
adjusted downwards, to follow the r ecent decline in commodity prices.  
An explanation shared by a majority of  stakeholders was that there is an 
understandable time lag between the demand for production inputs (such as fertilizers, 
plant production products and seeds), actual production and demand. Commodities 
are purchased by food and feed processors often months in advance in large quantities 
("panic purchases" of 2007/08). Since in puts costs were higher in 2007/08, 
insufficient time may have passed for an e ffective pass-through to  end prices. Other 
possible explanations related to the low shar e of the actual agricu ltural inputs in final 
food products' price formation, and the high ener gy and labour costs, in particular for 
the processed food that European consumers increasingly purchase. 
The retail sector emphasised  that overall price levels are heavily affected by 
regulatory and quasi-regulatory measures im plemented at national level and which 
constitute a burden to free trade and an unne cessary fragmentation of the EU internal 
market (e.g. planning permissions, openi ng hours restrictions, codes of conduct, 
etc.)31. Food producers have also concurred in saying that increased EU requirements 
regarding food and feed safety, import cont rols, the use of fertilizers and other 
environmental concerns have a heavy wei ght in the end price formation of their 
products. NCAs have also highlighted in a number of studies and advocacy initiatives 
the negative impact that certain regulatory  restraints may have on competition (e.g. 
see repeal of the Royer – Ra ffarin laws in France, retail  Planning System in Ireland, 
regional laws in Italy, urban planning and zoning laws in Belgium, Portugal and the 
UK, administrative authorisations in Spain). 
Notwithstanding the above structural plausible explanations of price stickiness, it is 
important to analyse the distribution of va lue added and profitability along the supply 
chains as a factor which ma y also intrinsically contribut e to such shortcomings in 
pass-through to end consumers.  
In light of an often exacerbated political deba te, the retail sector has frequently been 
under the spotlight as the sector where the profit margins are allegedly highest, and 
where the most substantial amount is added to the formation of the final consumer 
price32. To counteract such allegations, the reta il sector representatives recalled that 
their net operating margins are relatively low. For exam ple, in 2008, in France, the 
price of a salad was structured as follows33: the end-consumer retail price per unit was 
                                                 
31 See also a study on " Market structure in the distribu tion sector and merchandise trade ", 
Working Party of the Trade Committee, OECD, 200 7. The study confirms that regulation may 
lead to market fragmentation that may not be  optimal from an effici ency point of view. 
32 According to representatives of retail sect or, it should be recalled however that modern 
retailers are more than simple outlets in the sense that they add value as service providers 
though promotional and marketing activities, information to consumers, investment in 
customer proximity services, and innovation on new products. Such services incur costs and it is understandable, from a business perspective, th at these costs are reflected to a certain extent 
in consumer prices. For example waste and shrinkage costs are often high in modern retail 
outlets. 
33 Data of the Fédération des Entreprises du Comme rce et de la Distribution (FCD) available at: 
http://www.fcd.asso.fr/maj/upload/docs_fcd/communiques/91.pdf. 
 
EN 14   EN€ 0.83. Out of this, 47% of end price (€ 0.39) went to the producer/ seller34; around 
25% amounted to various logistical costs and around 29% represented the commercial 
margin of the retailer. Out of this gross retailer margin of 29%, the net operating margin amounted only to 2%. The rest was absorbed by the cost of destruction of 
merchandise (8%), labour costs (8%) and other variable costs (11%).  
The wholesalers, traders and food industry representatives al so claim that their profit 
margins have not increased in the last year s. This may mean that no single operator 
captures a high percentage of the value added. It may be the multiplication of the number of players on food markets, each a dding a mark-up, which leads to a more 
rigid structure, acting as filter in price transmission to end consumers. In addition to this, the way the margins are determined might also have an influence on the difference between consumer prices and pr oducer prices. For instance, it would seem 
that in certain cases intermediary margins are kept within a certain pre-established range regardless of the fluctu ations of producer prices an d other market conditions. If 
this mark-up phenomenon would multiply at each  intermediary level, it is possible to 
presume that the end price would also be increased as a result thereof. 
Stakeholders and NCAs explain the re cent widening of the gap between 
producer prices and consumer prices by a number of factors mainly linked to the 
structure of the food sectors and to  the different regulatory frameworks 
surrounding food markets.  
This notwithstanding, a more accurate overview of the functioning of the supply 
chain, in particular, at its middle stage , in terms of competition conditions, 
regulatory constraints and other structur al factors, may be therefore necessary. 
Analysis should focus on speci fic sectors (as identified in Section 2) such as fruit, 
vegetables, fish, meat and milk. In such sectors, given the relatively low degree of 
processing/ transformation involved, it  may be easier to detect where price 
stickiness may arise and the type of malfunction that may occur. 
Indeed, a better understanding by the Co mmission and Memb er States of the 
interplay of such factors, over an ade quate period of time , may contribute to 
finding the adequate policy tools to tackle any possible concern as regards the 
functioning of the food supply chain.  
3.4. Milk: a case for urgent action  
After an unprecedented period of high prices for milk and dairy products in 2007-
2008, European producers now face uncertain markets, currently characterized by a 
sharp drop in producer prices . The initial 2007 price hike s within the dairy supply 
chain first appeared on commodity markets,  particularly on the markets for skimmed 
milk powder (SMP) and butter. From these internationally connected markets, the 
price increase was promptly transmitted to  agricultural milk producers and to EU 
consumers. Regarding the following fall in commodity prices in 2008, the full 
transmission to the agricultural sector became evident in substantially lower farm gate 
                                                 
34 Salad conditioned to be sold includes price paid to producer, conditioning fee and first seller 
margin. 
 
EN 15   ENprices for raw milk, while aggregated consum er prices still remain at comparatively 
high levels. 
A number of farmer and milk producer pr otests were recently carried out throughout 
Europe. Farmers claim that their livelihoo d is threatened despite intervention 
mechanisms that the Commission and nationa l governments have deployed. The price 
of 21 €/100kg is the so called intervention milk  price equivalent, the 'value' of milk in 
case all milk were to be processed into butter and SMP and sold at their respective intervention prices. As an example, the co st of milk production in Northern Ireland, 
was 20.9 €/100kg in 2006 (before the increase in f eed, fuel and fertilizer prices). It is 
estimated that increased input prices ha ve elevated producti on costs to around 22.9 
€/100kg. The current milk price appears lowe r than production costs, which from the 
producers' perspective is not a sustainabl e situation. Furthermore, since consumer 
prices of milk have remained high, Europ ean consumers may not fully benefit from 
lower end prices deriving from low producti on prices. This would mean that the value 
added is captured at certain stages of the milk chain.  
Several national studies have recently anal ysed price formation in the milk supply 
chain, in broad terms. For example, in a study
35 regarding the milk chain prepared by 
the Spanish Ministry for Agriculture, it is observed that a number of factors influence 
the end price of milk. The study concluded th at the structure of the value added chain 
for packaged liquid milk is quite rigid. In  order to improve th e functioning of the 
supply chain, the study observed that emphasis should be placed on improving the structures of the sectors involved. For inst ance, the efficiency of dairy farms should 
improve so as to make them less dependent on the variations of inputs, seasonal price 
tensions, over-production in exporting countries, etc. Ther e should also be a further 
concentration of the milk industry to go in pair with a further rationalisation of the 
costs for collection and distri bution, as well as perhaps a llow for a shortening of the 
supply chain. A study of the Belgian Ministry for the Economy on the milk supply 
chain
36 also observed that " the relationship that connect s the end consumer to the 
producer is far from being mechanical, determ inist, easily identifi able, foreseeable or 
immediate in time. " It further stated that " it would not be meani ngful to compare the 
price of milk paid to the cattle breede r to the price paid by the end-consumer ". The 
study further noted that the revenues of cattle breeders depend increasingly more on the worldwide evolution of supply and dema nd. As for the costs these breeders incur, 
animal feed and energy constitute signi ficant expenses that also closely follow 
international trends. Consequently the fina ncial situation of breeders over the period 
of 2006-2008 has been mostly affected by the increase of such variable costs. On the 
basis of all the information gathered, the Belgian authorities concluded that 
"divergences in pricing on short term are not  to be necessarily linked to any anomaly " 
in the milk supply chain and that " no information was identified that would signify 
any irregularities at the level of price fo rmation at any stage of the milk supply 
chain ". 
The above-mentioned research highlights the wide differences that exist between the 
milk supply chains of the different EU Memb er States. Such differe nces are illustrated 
                                                
 
35 Food price observatory of the Spanish Ministry for the Environment, Study on price formation 
of bottled milk, April 2009. 
36 " Evolutions récentes des prix et des coûts dans la filière du lait" , SPF Economie, October 
2008. 
 
EN 16   ENin the diverse actions that Member States have undertaken  to date. Indeed, a number 
of NCAs have investigated or are currently monitoring this sector in more detail (e.g. 
(i) enforcement actions taken against cart els and restrictive practices in Greece, 
Lithuania, UK and Ireland, (ii) sectoral stud ies in Belgium, France, Latvia, Lithuania, 
Romania, Slovakia, and Sp ain, or (iii) ongoing invest igations in Germany and 
Denmark). It may be worth noting that the competitive process may contribute to realigning supply and demand, leading to a rationalisation of supply and stimulating 
innovation on the long term. In light of the urgency to address the difficult situation 
that the milk sector is undergoing curre ntly, the Commission a dopted in July 2009 a 
Report on the Dairy Market Situation. More information is curren tly being gathered 
by the Commission from Member States' Authorities on price formation and 
transmission in the milk supply chains. Such informa tion may help the Commission 
detect possible endemic problems and better coordinate future actions. 
As indicated in the Commission Communica tion on the Dairy Situation of 22 
July 200937, the Commission and NCAs are considering the possibility of 
stimulating a focused monitoring of dairy markets, and where appropriate, 
envisage enforcement actions at EU or national level through the operation of 
joint working team with the European Competition Network.  
4. PRACTICES SPECIFIC TO FOOD SUPPLY CHAINS  
One of the key objectives of the curre nt exercise was for the Commission to 
understand directly from business operators and NCAs whether they  encounter certain 
practices that, on a case-by- case basis, may possibly ra ise concerns from an EC 
competition law perspective (entailing harmful effects on competition and consumer welfare). 
It must be noted from the outset that NCAs  have been very active over the last years 
in terms of their enforcement actions on f ood markets. This common trend has led to 
the finding of a large number of infringeme nts of competition rules in these markets 
and the imposition of significant fines. In th is regard, NCAs have mostly focused their 
enforcement actions on cartel activities.  Indeed, NCAs have actively pursued 
collusive horizontal agreements affectin g a number of food markets (among others, 
milk and dairy in Bulgaria, Greece, Lithua nia and the UK; bread and pasta in Italy; 
poultry in the Czech Republic, etc.). NCAs  have also focused on pursuing certain 
specific resale price maintenance cases also affecting food markets at local level (e.g. 
chocolates in France, flour in Denmark, ice-creams in Poland, etc.). A number of 
abuses of dominance cases have also been assessed in different Member States (e.g. 
Denmark, France, Hungary, Portugal, Swede n, etc), but they remained limited in 
scope and for the most part targeted the food processing i ndustry. As already 
mentioned, to date no abuse of dominan ce against retailers has been found, even 
though certain ongoing investigations are be en carried out at national level. 
The above actions relate to "classic" enforcement actions  deriving from Art.81-82 EC. 
This notwithstanding, the Commission Co mmunication on Food Prices of December 
                                                
 
37 See also subsequent creation of High Level Expert Group on Milk in October 2009, at 
http://europa.eu/rapid/pressReleasesAction.do ?reference=IP/09/1420 &format=HTML&aged=
0&language=EN&guiLanguage=en 
 
EN 17   EN2008 identified certain practi ces, specific to food markets,  which may give rise to 
competition concerns, in particular circumstances: joint purchasing agreements ("buying alliances"); single branding oblig ations and tying; exclusive supply 
agreements; certification sche mes and the increased use of private label products. For 
the sake of clarity and comp leteness, Section 4 groups thes e practices into two broad 
categories: retail-driven practices and s upply-driven practices. Also, it must be 
emphasised that such practices are not per se anticompetitive and may entail 
efficiency gains that can justify their a pplication. It is only in certain special 
circumstances that they may raise competition concerns.  
Among the above listed practices, in th e context of the DG Competition survey, 
stakeholders and NCAs have in particular singled out some practices as raising most 
frequent concerns on food markets, in pa rticular circumstan ces: joint purchasing 
agreements, the increased use of private labels, tying and bundling and joint selling agreements. Given the relatively novel issu es they raise, in parallel with the 
development of certain business models wh ich are in constant evolution, Section 4 
focuses mainly on them. 
4.1. Preliminary considerations on the concept of "buyer power" 
Over the last two years, intense public de bate has focused on the alleged abuses of 
buyer power by large food retailers. An importa nt caveat would need to be made from 
the outset in terms of application of comp etition rules to buyer power related issues. 
The primary objective of EC competition polic y is to ensure well-functioning markets 
to the benefit of citizens and businesses in the EU. Competition Authorities consequently tackle buyer power to the extent  that it harms, or could potentially harm, 
the competitive process and th ereby consumer welfare.  
In this regard, it should be  noted that unequal bargai ning power does not always 
present a " buyer power " problem, in terms of competition law; therefore, the two 
concepts should be carefully distinguished.  
"Unequal bargaining power " is present whenever one party to a proposed contract, 
be it either the seller or the buyer, can "dri ve a hard bargain"; that is, can impose upon 
the other contracting party term s and conditions that are deemed
 unfavourable by that 
other party. There can be numerous reasons fo r the first party's ability to do so without 
risking that its counterpart d ecides not to enter into the pr oposed contract: significant 
difference between the relativ e sizes and turnover of th e contracting parties (e.g., 
atomised small sellers), economic dependency arising out of long term business relationships (e.g., sole supplier/off-taker re lationship), significant sunk costs already 
incurred by one of the parties (e.g., upfr ont investments), and last but not least 
changing supply/demand conditions in the re levant market. Unequal bargaining power 
often leads to commercial dealings that app ear to be unjust, unfair or undesirable from 
a social or political point of view. This ha s in turn triggered legislative responses in 
many Member States such as, for example,  the adoption of unfair trading practices 
laws aiming to subdue the behaviour of th e powerful contracting party (e.g., Austria, 
Belgium, France, Germany, Portugal, Slov akia) or the introduction or envisaged 
adoption of codes of good practice establis hing a set of rules in  the transactions 
between large retailers and th eir suppliers (e.g. Czech Republic, Hungary, Lithuania, 
Portugal, Romania, Slovakia, Spain, UK). Section 4.4 below further tackles these 
practices (e.g. late payments, unilateral ch anges in contracts, ad-hoc changes to 
contractual terms, upfront payments as entry to fees to negotiations etc.).  
 
EN 18   EN"Buyer power " may have either beneficial or adverse effects on consumers. Buyer 
power is often exercised by buyers as a count ervailing power to achieve better prices 
and terms from suppliers. When such savings are passed on to consumers downstream in the supply chain, buyer power has benefi cial effects for consumers. Buyer power 
may also increase output in the upstream ma rkets and thus increase the welfare of 
consumers on the long run. The exercise of buyer power which leads to lower prices 
upstream is therefore not to be considered per se anti-competitive. Generally, with sufficiently intense competition on downstr eam markets, lower prices obtained on 
upstream markets will be passed on to c onsumers. On the other hand, if a buyer 
possesses monopsony power (i.e., he is the on ly buyer in the relevant market) or 
considerable buying power/ market power on the upstream purchasing markets, which is coupled with significant market power  on the downstream resale markets, a 
competition problem may arise if the buyer does not pass onto consumers any significant part of the benefits obtained on the upstream market from his suppliers. 
Moreover, if the exercise of buyer power is found to lead to a lo wer profitability for 
suppliers (e.g. suppliers’ sale price being below their costs), this may, in specific 
circumstances, induce suppliers to invest le ss in new products and may lead to a loss 
in product diversity and quality for end consum ers. This aspect is also taken into 
account by EC competition policy when assess ing the impact of the exercise of buyer 
power on consumers. Consumer welfare en compasses prices, di versity and quality. 
Abuses of buyer power are contrary to EC competition law where there is a 
proven detriment to downstream consum ers. Much of the current political 
interest is in fact focused on issues of  "unequal bargaining power" which should 
be distinguished from issues of "buyer power", and actually highlights problems 
faced by small suppliers in the context of  contractual negotiations with stronger 
buyers.  
Contractual imbalances associated with unequal bargaining power are tackled 
through policy tools other than compet ition law instruments, such as, for 
example, contract law, common agric ultural policy, SME policy, or unfair 
commercial practices laws. Most Member States have already enacted specific 
laws dealing with such issues and have  established legal protective mechanisms 
for all contractual parties in the context of their commercial laws. EC antitrust 
law is not concerned with particular outcomes of contractual negotiations 
between parties unless such terms would h ave negative effects on the competitive 
process and ultimately reduce consumer welfare. It is not the aim of EC 
competition rules, as currently devised,  to interfere in the bargain struck 
between contractual parties, in the absence of proven competitive harm.  
4.2. Retail-driven practices  
The series of practices detailed below are th erefore retail-driven in the sense that they 
are implemented by the buyers and they entail either the expression of buyer power or 
lead to its creation: 
4.2.1.  Joint purchasing agreements: "buying alliances"  
In order to strengthen their buyer power, especially when facing strong suppliers, 
retailers have increasingly started to use the vehicle of buying alliances in some of 
their negotiations with suppliers. Such buying alliances now al so regroup large EU 
 
EN 19   ENtrans-national retail chains (examples of  such alliances are COOPERNIC, AMS, 
Agenor/Alidis, EMD, etc.). At their orig in, such alliances aimed at pooling the 
required purchase volumes of their SME reta il members together, so as to build a 
critical mass that would allow them to co mpete with large retailers (chains/groups). 
These alliances developed over time aiming to  further obtain better negotiation terms 
from their strongest suppliers (e.g. ofte n producers of must-carry branded goods). 
However, it seems that actual joint buying now also occurs with the aim of obtaining 
scale economies in the specification and pr ocurement of private label goods. It seems 
therefore that some international retail a lliances thus go beyond the mere concept of 
"buying alliances38". On the basis of the information gathered to date, the overall 
objectives identified for these modern retail alliances are to negotiate from suppliers international discounts based on the allian ce’s performance (in addition to national 
rebates), to provide
 international marketing services to  their suppliers and to achieve 
economies of scale in the procurement of private label goods.  
Purchasing agreements, when concluded among market players with the aim of 
achieving volumes and discounts similar to their bigger competitors are normally pro-
competitive. Even if a moderate degree of  market power is created, this may be 
outweighed by economies of scale provided  the parties actually bundle volume. 
Competition Authorities have traditionally taken the view that such purchasing alliances would not be problematic from a co mpetition standpoint as long as: (i) the 
low prices obtained by retailers are passe d onto end-consumers, and (ii) there is 
sufficient effective competition between re tailers downstream. Given the relatively 
scarce information on the operations of large buying alliances, DG Competition has asked stakeholders and NCAs for their opinion on this relatively new phenomenon. 
From the responses gathered, it would seem that, in certain specifi c cases, such large 
transnational buying alliances may raise concer ns as to their effect on competition and 
ultimately, on consumers. In particular, certain stakeholders suggested that such 
alliances may, in some circumstances, fac ilitate market partitioning. Moreover, 
alliance members may have low incentive s to pass onto consumers the revenues 
obtained from the payments made by suppliers  in exchange of international marketing 
services provided to them by such retail alliances. 
The market partitioning concern would imply th at retailers would agree not to expand 
or agree to reduce their presence in th e geographic territory covered by another 
member of the same alliance. Competition would therefore be reduced
39. Such a 
possibility cannot be discarded since these alliances frequently have only one member 
per country. It must be reca lled however that no antitrust cases of retail cartels have 
been sanctioned by any Competition Authority to date. 
Another potential competition c oncern relates to the fact th at the profits reaped from 
these alliances, resulting from considerable financial advantages provided by their suppliers, may be kept by alliance members and not passed onto consumers. It seems that retail alliances receive payments from suppliers in  exchange for th e provision of 
                                                
 
38 Retail representatives confirm such overall activities of retail alliances. 
39 Commission Notice, Guidelines on the application of Art. 81 EC to horizontal cooperation 
agreements, (2001/C 3/02).  Parag. 124 states " purchasing agreements only come under Art. 81 
(1) by their nature if the cooperation does not truly concern joint buying, but serves as a tool to engage in a disguised cartel, i.e. otherwise prohibited price fixing, output limitation or 
market allocation."  
 
EN 20   ENinternational marketing servic es (e.g. simultaneous product launches in all stores of 
the alliance, coordinated promotional campa igns, "access to people" information and 
provision of consumer data, etc.). These pa yments, based on end of year performance 
indicators of the alliance as a whole, are allegedly made at the end of the year, ex-
post, after the services were provided a nd in the form of lump-sums paid to the 
alliance. These amounts are then split between the alliance members who have provided such services. Suppliers often pe rceive these payments as a necessary 
burden they need to incur in order to ensu re that their products are distributed by the 
members of these alliances. Indeed, the fear  of being delisted is a major recurrent 
concern of suppliers throughout  the whole supply chain. It seems that there is no 
direct relationship between these lump sums and the re tail products for which the 
services were provided by the alliance. A re tailer may therefore be reluctant to reduce 
consumer prices in advance of a future paym ent he will receive at the end of the year 
from his suppliers. Such lump sum revenue s may be independent of sales volumes 
and thus may not affect pricing decisions. They may hence be used by alliance members to finance other activ ities, and may thus not be passed onto consumers in the 
form of cheaper products. Furthermore, a di rect link between (i) the initial provision 
of the marketing services by alliance me mbers, (ii) the end-of-year lump sum 
payments made by suppliers and (iii) the end prices of the products for which the 
marketing services were provided in the fi rst place is rather difficult to construe. 
Finally, suppliers may have in centives to recoup th e losses they incur by the payments 
made to the alliance and ther efore increase the price of  their products. This would 
have a possible upward effect on consumer prices.  
According to the Guidelines on Horizontal Agreements ("Horizontal Guidelines")
40, 
the primary concern in the context of such alliances is that lower prices may not be passed on to customers further downstream . This may cause cost increases for the 
purchasers' competitors on the selling market s because (i) either suppliers will try to 
recover price reductions for one group of customers by increasing prices for other 
customers or (ii) purchasers' competitor s have a more limited access to efficient 
suppliers
41. NCAs have confirmed that  to date they have very limited experience with 
respect to joint purchasing agreements performed by large, transnational retail operators. In line with the Horizontal Gu idelines, a key element considered by the 
NCAs to determine potential anti-competitive effects stemming from this kind of 
                                                
 
40 Supra footnote 38. 
41 There is no absolute threshold which indicate s that a buying cooperation creates some degree 
of market power and thus falls under Article 81 (1) EC. However, as the Horizontal Guidelines 
indicate, in most cases it is unlikely that market power exists if the parties to the agreement 
have a combined market share of below 15 % on the purchasing market(s) as well as a 
combined market share of below 15 % on the selling market(s). It  should also be recalled that 
joint purchasing may involve both horizontal and vertical agreements. In these cases a two-
step analysis by Competition Authorities is necessary . First, the horizontal agreements have to 
be assessed according to the principles descri bed in the Horizontal Guidelines. If this 
assessment leads to the conclusion that coop eration between competitors in the area of 
purchasing is acceptable, a furt her assessment will be necessa ry to examine the vertical 
agreements concluded with suppliers or indi vidual sellers. The latter assessment will follow 
the rules of the Block Exemption Regulation 2790/1999 on the application of the Article 81(3) 
to categories of vertical agreements and con certed practices ("Regulation 2790/1999) and the 
Guidelines on Vertical Restraints (see Commission Notice, Guidelines on Vertical restraints 
(2000/C 291/01), parag. 29). 
 
EN 21   ENcooperation are the market shares that buying groups can reach both in upstream 
purchasing and downstream selling markets. 
Given the reticence of operators to disclose information relating to the 
functioning of these buying alliances, it is premature to draw at this stage any 
definite conclusions as to their impact on competitio n. In certain theoretical 
circumstances, such forms of cooperati on may harm the co mpetitive process 
downstream and entail fewer incentives for their participants to transfer benefits 
gained from rationalisation processes upo n their consumers, and their impact on 
innovation and product variety may also th erefore be questioned. On the basis of 
the limited information available, the Commission and NCAs should continue 
gathering more extensive and accurate data in order to deepen their analysis on 
this specific area. 
At this moment in time, and based on th e available market share data, it appears 
however that such buying groups perf orm a countervailing force in order to 
build a critical mass in negotiations with  multinational suppliers of branded 
goods, and that no direct link  can be established at this  stage with potential price 
stickiness effects.  
4.2.2.  Increased use of private label products 
Broadly speaking, private label products encompass all merchandise sold under a 
retailer's brand. That brand can be the retailer's own name or a name created exclusively by that retailer. The initial ratio nale behind the creati on of the concept of 
private labels is to provide retailers with  a way to satisfy consumer demand for cost-
efficient alternatives to branded products, while retaining produc t range and ensuring 
quality (since retailers could not afford to  endanger their reputation as distributors if 
they provided poor quality own-products). Su ch private labels are also used by 
modern retailers to compete with discounters, in an atte mpt to offer relatively cheap 
goods. Private labels originate from a co mpetitive dynamic, which, prima facie, can 
be beneficial to consumers.  Furthermore, private labels  are often produced by SMEs, 
and may have the effect of stimulating th e growth of the latter, allowing them to 
expand together with the retailers that sell the end products, home and in other 
Member States
42. In non-processed food markets, privat e labels act as a sort of quality 
certification by retailers, leading to the a ggregation of supply more efficiently and 
entailing a faster ability for consumers to recognise and ascertain the quality of fresh 
produce. Furthermore, private labels may help rationalise the food supply chain since 
they allow retailers to enter into direct procurement and purchasing negotiations with their suppliers. As a consequence thereof,  private labels may allow retailers to 
participate in the aggregation of supply, a function that is trad itionally left to 
intermediaries in the sector. This can lead to efficiency gains and help reduce potential price stickiness by the shortening of the supply chains. Also, to a certain 
extent, retailers that offer private la bels discharge their producers from the 
responsibility of these products vis-à-vis c onsumers. In processed food chains, where 
they are mostly used, private labels ar e competitors of established brands. The 
                                                
 
42 An example was provided of a - range of Ita lian origin products that are now also sold in 
France after the joint venture of Co nad Italia and Centrales Leclerc. 
 
EN 22   ENincreased use of these products may also he lp shorten the proce ssed food chain since 
they allow retailers to direct ly participate in production. 
A number of market operators and NCAs ha ve however raised concerns with respect 
to the increased use of private label products  by retailers. These c oncerns have mainly 
referred to the potential foreclosure effects and the impact on prices that may stem 
from such an increased use.  
Indeed, from a competition policy perspective, the extensive use of private labels may 
possibly lead to foreclosure of existing a nd potential competing suppliers. This could 
restrict in-store inter-brand competition th ereby reducing the number of product items 
available on shop shelves. Consequently consumer choice may be limited (both in terms of product availability and product quality). Such c oncerns can be raised when 
one considers that shelf space is limited. By stocking private labels on their shelves, retailers thus become direct competitors of their suppliers
43. It can be argued that, the 
greater the share of private labels within th e total turnover of a retailer, the less the 
retailer depends on branded goods' turnover. It  seems that retailers increasingly stock 
one or two A brands of a pa rticular product (premium refe rence brand for a category) 
and their own private labels, which may also be divided in subsequent categories. This 
may therefore result in a satu ration of shelf space and ther efore amount to foreclosure/ 
elimination of other secondary B, C, etc, brands (such brands may be regional brands 
for example, and it is argued by some that the diversity of the Eu ropean food heritage 
can be gradually lost as a result). 
In terms of pricing, retailers usually pri ce their private label 20-30% below brand A44. 
Retailers may thus have an incentive to rais e the price of the A branded product so as 
to maximise his margins on the sale of priv ate labels. In addition, private labels may 
also entail other secondary effects on the pricing of competing branded goods. Indeed, 
when a private label appears on the market, it could be envisage d that, to a certain 
extent, brand manufacturers may be willing to give up serving the potentially 
"switching" consumers and would concentrate instead on customers loyal to the branded product. As a consequence it is possi ble that they could exploit brand loyalty 
and increase prices. This could entail that consumers would pay more for branded goods in the aftermath of a competing private label for that product segment.  
Another potentially negative aspect entailed by private labels is that they may have a 
stalling effect on the innovation of branded goods suppliers. Indeed, such suppliers 
may stop innovating altogether from a fear of  "free-riding" by private label producers. 
Whilst recalling the pro-competitive effects of private labels, the vast majority of NCAs agree that there is a need to better understand the im pact of this growing trend 
on competition. 
Moreover, within the processed food supply ch ains, it is important to note that certain 
practices may especially raise competition-re lated concerns if taken in a context of 
cumulative effects. Indeed competition concer ns can arise in a context where there are 
strong suppliers as price setters  that have as counterparts strong buyers. In such cases 
                                                
 
43 " Retailer and private labels: asymmetry of information, in-store competition and the control 
of shelf space ", Pieter Kuipers, in " Private labels, brands and competition policy ", Oxford 
University Press, 2009. 
44 Retail representatives mentioned such pricing strategies of private labels compared to A 
brands. 
 
EN 23   ENthere may exist a common interest between such powerful operators to maintain a 
market status quo, which de facto forecloses  weaker competitors (actual or potential 
weaker suppliers/ buyers). This  can be particularly pert inent in a situation where 
modern retailers have developed business mode ls that include the marketing of private 
labels and where strong suppl iers have developed "must- carry" brands tie or bundle 
several products within a category. Sin ce shelf-space is limited, there may be an 
interest from both sides in allocating a nd maintaining that space for private label 
products, on the one hand, and a limited numbe r of brands (mostly 2 or 3) marketed 
by leading food industry products, on the ot her hand. This may entail foreclosure 
effects as regards actual or potential supplie rs of weaker secondary brands. This may 
also possibly foreclose weaker buyers who cannot build the critical purchasing mass 
s o  a s  t o  s e c u r e  s u p p l y  o f  such brands at as advantageo us prices as their larger 
competitors. 
Market operators and NCAs have expressed concerns related to the potential 
long-term anti-competitive effects of pr ivate labels on consumer choice, quality 
of products and pricing of food in general.  
More solid information would be needed in  this context in order to analyse the 
long-term effects of the increased use of private labels in a context in which 
retailers are increasingly viewed as co mpetitors of their suppliers. When the 
extensive use of private labels leads a retailer and its competing leading brand 
supplier to coordinate their respective pric ing and assortment strategies, in-store 
competition between brands may be res tricted and, absent a sufficient 
competitive pressure from other retail ers, consumers may suffer from higher 
prices or reduced choice fo r the relevant products.  
However, since private labels are prim arily the expression  of a competitive 
dynamic which may contribute to ration alizing the food supply chain, more 
robust data would need to be gathered before reaching any conclusion on 
possible negative effects they may entail  
4.2.3.  Other retail driven practices: Exclus ive supply agreements , Certification 
schemes, Slotting allowances, Category management 
Exclusive supply  is an extreme form of limited distribution in as far as the limit on the 
number of buyers is concerned: the agreem ent specifies that there is only one buyer 
inside the Community to which the suppl ier may sell a partic ular final product. 
Notwithstanding possible economies of scale in  distribution as potential efficiency 
enhancing effect, the main competition risk of exclusive supply is foreclosure of other buyers
45. The importance of the buyer on the down stream market is the main factor 
which determines whether a competition problem may arise46. If the buyer has no 
market power downstream, no appreciable negative effects for consumers can be 
                                                 
45 Exclusive supply is exempted from the applicability of Art. 81(1) EC up to 30 % market share 
of the buyer, even if combined with other non -hardcore vertical restraints such as non-
compete, see Regulation 2790/1999. 
46 The market share of the buyer on the upstream purchase market is also  important for assessing 
the ability of the buyer to "impose" exclusive supply which forecloses other buyers from 
access to supplies. 
 
EN 24   ENexpected. During discussions, no market opera tor reported particul ar concerns with 
exclusive supply agreements. The supply se ctor has not provided any information 
with respect to potential s ituations where suppliers woul d be tied to one distributor. 
Retailers concur to this opinion and have stated that they are not confronted to 
shortages of supply deriving from possi ble foreclosure problems resulting from 
exclusive supply agreements. Some NCAs ha ve dealt with exclusive supply-related 
cases (e.g. Austria, Hungary), but such issues  have not been at the forefront of NCA 
activities and have not resulted in the sanctioning of competition law infringements. 
Certification schemes  are required by retailer s so as to certify th e quality, safety and 
origin of food products that will be then marketed through retail outlets. Whilst their 
usefulness responds to a number of policy goa ls (e.g. health and safety), such schemes 
are often quoted by farmers/ food producers as  representing a significant financial and 
administrative burden for them (given th e multitude of such schemes and their 
sometimes overlapping requirements). Reta il-driven certification schemes could 
indirectly compel suppliers to  sell to only one buyer. Th e potential competition risks 
that this would entail as a consequence would be possible foreclosure of competing 
buyers. However, buyers interviewed stated that they do not have  any shortage of 
supply concerns. This means that no forecl osure of competing buyers would seem to 
exist in practice stemming from the existenc e of certification sche mes. Furthermore, 
NCAs have not mentioned having encountered  concerns deriving from such schemes. 
It must also be recalled that such certif ication requirements ar e most frequently 
imposed upon the entire food supply chain by national and EU regulations for a 
number of policy reasons, such as th e protection of health and safety.  
Initially, the term " slotting allowances " was used to describe payments made by 
suppliers to retailers to  support the introduction of new products. The term has 
gradually evolved to represent the paymen ts made by suppliers for premium product 
placements on shelves and in-store. In any retail outlet, shelf space is limited and 
different positioning on shelve can influence the success/ failure of a product. The use 
of upfront slotting allowances may in many cases contribute to an efficient allocation 
of shelf space for new products. As seen previously, suppliers compete with each 
other and with the retailer's private label products for shelf space. The store shelves are therefore among retailers' most important assets in their relationships with suppliers. Retailers usually demand special compensation from suppliers for shelf allocation/ positioning on shelf. Suppliers also use slotting allowances to their benefit so as to ensure an optimal positioning fo r their products. Slotting allowances are 
therefore fixed fees that manufacturers pay to retailers in order to get access to their shelf space. The use of such practices may raise competition concerns in several circumstances. Slotting allowances may resu lt in anticompetitive foreclosure of other 
retailers, in particular  when these payments induce the supplier to cha nnel its products 
through only one or a limited number of reta ilers. Possible foreclosure of competing 
suppliers can also occur if some suppliers are not able to pay these allowances with 
the risk of remaining out of the shelves. In  terms of pricing, s uppliers may recoup the 
losses incurred by these payments by raisi ng the prices of thei r products, driving 
consumer prices upwards. Furthermore, retailers may not pass onto consumer the 
financial advantages obtain ed by suppliers, in the form  of cheaper products. Such 
practices may also lead to less consumer  choice. However, all such competition 
concerns need to be assessed on a case-by-cas e basis, taking into  account factors such 
as the market power of suppliers and buyers. To date NCAs have only to a limited extent dealt with such issues. 
 
EN 25   ENCategory management  agreements are agreements by which, within a distribution 
agreement, the distributor entrusts a s upplier (the "category captain") with the 
marketing of a category of products incl uding in general not only the supplier's 
products, but also the products of its competitors. The use of category management ensures that the optimal quantity of products  is presented timely  and directly on the 
shelves. It contributes to achieve economie s of scale by allowing suppliers to better 
anticipate demand and tailor their promo tions accordingly. The extent to which 
category captains are used by retailers can vary widely across firms and product 
categories. At one extreme, some retailer s do not use category captains at all, even 
though they undertake category management pro cesses internally. Other retailers rely 
on a single supplier for advi ce about the management of the category and check this 
advice against the recommendations of othe r suppliers and their own data. At the 
other extreme, some retailers might delegate all cate gory management responsibilities 
to the captain for one or more categorie s. Whilst category mana gement provides the 
opportunity for major cost savi ngs in the distribution of c onsumer goods, it also raises 
potential competition related concerns. A category captain can use its role to exclude rivals or otherwise to incr ease significantly rivals’ co sts of competing. A category 
captain can also use his role to facilitat e collusion among rivals in the category or 
between competing retailers that the categor y captain serves. To date NCAs have only 
to a limited extent dealt with such issues. 
The current exercise led to the conclusion  that exclusive supply agreements are 
not a major concern for operators and NCAs.  
To the extent that no foreclosure concern s are detected, consid erations related to 
the proliferation of certification scheme s and to the objectives they seek to 
achieve are best tackled by policy inst ruments other than competition tools. 
Slotting allowances are currently perceive d by the majority of operators as a 
requirement of modern trade and as an in trinsic characteristic of the business 
model of modern retailers. Overall, it woul d seem on the basis of the information 
gathered to date that slotting allowances are not among the major causes of 
concern to operators in the food supply chain, nor among the main concerns of 
NCAs. 
Similarly, category management related issues do not appear to be of major 
concern to the operators that intervened in discussions, or to NCAs.  
4.3. Supplier-driven practices  
In order to have an as complete vi ew as possible on practices which may 
circumstantially affect competition on f ood markets, a number of supplier-driven 
practices are detailed below.  Most of such practices ma y occur in a context where 
suppliers have significant market power.  
4.3.1.  Supplier cartels, resale price maintenance 
In terms of competition law enforcement related to the food supply chain, it seems 
that the last years have been  characterised by recent supplie r-side cartel activities that 
have arisen on food markets. Based on info rmation presented by operators and on data 
continuously gathered by NCAs it appears th at the supply sector has been prone to 
collusive agreements (e.g. pasta and bakery in Italy, canned fruit and milk in Greece, 
 
EN 26   ENpoultry in Czech Rep., beef processors in Irela nd, milk processing in Lithuania, etc.). 
A relatively high number of other such cases  are currently being investigated, at 
national and EU level. NCAs have also dealt with a number of resale price 
management agreements (e.g. olive oil in Spain, frozen vegetables in Greece, soft drinks in Czech Republic, c hocolates in France etc…). 
Cartel agreements have been rapidly iden tified, investigated and addressed by 
Competition Authorities, both at nation al and EU level. This cartelisation 
phenomenon may, to a certain extent, h ave contributed to the artificial 
maintenance of high food prices. NCAs h ave also promptly addressed restrictive 
resale price maintenance practices. This highlights that NCAs are well-equipped 
to tackle such "classic" competit ion concerns on national markets.  
4.3.2.  Single branding obligations and tying 
From the discussions held with stakeholde rs, it seems that practices amounting to 
single branding (in the form of an oblig ation/ incentive scheme which makes the 
buyer purchase practically all his requirements on a particular market from only one 
supplier) do not occur frequently on food supply markets. Under certain limited 
circumstances, tying obligations may help to produce efficiencies arising from joint 
production or joint distribution. Competition concerns relative to such agreements 
would relate to reduced in-store inter-brand competition47, amounting to lesser choice 
for consumers and possibly higher consumer prices. On the other hand, stakeholders 
have expressed concerns rela tive to practices amounting to  tying, full range-forcing 
and bundling which seem to occur frequently in the food sector, es pecially in cases 
involving very popular or must-carry bra nds. This would allegedly occur when 
suppliers of very popular brands make th e sale of these pr oducts to retailers 
conditional on retailer purchasing a bundle of  products, which also comprise less 
popular products. Under certain  circumstances, and taking into account the market 
position of the supplier, such practices may entail competition concerns since they 
may have foreclosure effects,  rising rivals' costs and potentially leading to higher 
prices. Hardly any NCA has identified complaints received or actions taken with respect to single branding or tying obliga tions (e.g. ice-cream ma rket in Portugal, 
herbs and spices market in Germany, or ongoing investigations in Bulgaria). An explanation of this could be that enfor cement actions of NCAs in food and retail 
markets have focused to a larger extent , as above mentioned, on other hardcore 
practices either of horizontal (e.g. cartels) or vertical (e.g. resale price maintenance) 
nature. 
Tying and bundling concerns are frequent in  the food sector. Since Competition 
Authorities are well equipped to tackle su ch concerns, it should be recommended 
that they strengthen their vigilant monito ring and enforcement activities in this 
respect throughout the EU.  
                                                 
47 See Guidelines on Vertical Restraints. 
 
EN 27   EN4.3.3.  Joint selling 
Commercialisation agreements occur with relative frequency in the context of joint 
selling agreements framed within POs/ farmers cooperatives in the non-processed 
food sector. Such agreements may entail significant efficiencies linked to economies 
of scale in distribution. They  are also expressly acknowledg ed in the framework of the 
Common Agricultural Policy as a vehicle fo r strengthening producer cooperation. The 
principal competition concern about such joint selling agreements is price fixing between competing producers. This may e liminate price competition between parties 
and also restrict the volu me of products to be deli vered by participants. Such 
agreements are caught by the provisions of Ar t. 81(1) EC, even if parties are free to 
sell outside the agreement. However, it sh ould be noted that, if the cooperation 
between parties is not limited to joint selling, but also involves upwards joint 
production (production joint ve ntures) or joint integrati on of assets to meet the 
demand of customers in an aggregated manner (e.g. fresh product assortments), the 
fixing of prices to immediate customers might be regarded as an ancillary restriction. 
Such agreements may thus raise questions in terms of the limits of joint selling, taking into account the specificiti es of the agricultural sector on one hand, and competition 
policy rules on horizontal agreements on the ot her. It appears that in some Member 
States such questions curre ntly arise (e.g. milk in Es tonia, vegetables in The 
Netherlands, citrus in Spain). 
Further reflection would be needed by  the Commission, together with Member 
States' Authorities on the interface betw een agricultural policy and competition 
rules, in light of the critical debate re garding the role of POs, cooperatives and 
other forms of horizontal cooperation between suppliers.  
Such cooperation, subject to the limits and conditions laid down by competition 
rules, may help agricultural entrepreneurs to devise market oriented strategies, 
aggregate supply and integrate assets, as we ll as benefit of efficiency gains and 
reach synergies that may ultimately benefit consumers.  
4.3.4.  Hindrances to parallel trade 
In the context of the current exercise, a number of concerns were reported, alleging 
that certain suppliers of processed food, a nd in particular of branded products, have 
set up exclusive distribution networks that  prevent parallel imports. In this sense 
passive sales by appointed distributors to c lients located in the territory of another 
distributor would be prohibite d or seriously hindered. NCAs  are also aware of such 
concerns. 
4.4. Other practices linked to unfair trading 
One of the main findings of this exercise is that, when asked to comment about the 
practices that they perceive as most seri ously affecting their business, all of the 
suppliers mentioned practices related to unfai r trading, rather than to breaches of EC 
competition rules. Such buyer practices am ount, among others, to late payments, 
unilateral changes in contracts or ad-hoc changes to contractual terms, payments 
demanded in return of no real service being provided, upfront sums of money 
perceived as entry fees to negotiations, etc.  A number of suppliers have conveyed the 
message that such practices amount to abus es of bargaining power from their stronger 
 
EN 28   ENbuyers, who are often perceived as gatekeeper s to consumer markets. This means that 
suppliers are de-facto comp elled to accept the conditions imposed by their retail 
counterparts who have therefore the capacity to strike advantageous deals from their 
suppliers, to the detriment of the profit margins of these suppliers. 
As discussed in detail in Section 4.1 above, it is important to recall that EC 
competition rules are not in principle designed to address the above-mentioned practices, which in most cases amount to c ontractual imbalances and therefore pertain 
to the field of contractual or commercial law,  as regulated by the laws of the different 
Member States. The above-mentioned practic es do not prima facie entail direct 
consumer harm, but are rather revelatory  of commercial tensions deriving from 
different bargaining positions. Such commer cial tensions may be symptomatic of 
certain malfunctions in the food supply chain due to th e difference between what 
supplier perceive as a “just price” for thei r products and the real  price they obtain 
from the negotiations with their buyers. In this context, the concept of “just prices” 
becomes related to the socio-political sp here and departs from the economics of 
competition policy. Considerations  related to “just prices”, if at all needed, should be 
tackled by national and possibly EU regulat ors on the basis of social interests, 
innovation and competitiveness of the EU  food supply chain on world markets. 
Contractual imbalances associated with  unfair trading practices are tackled 
through policy tools other than compet ition law instruments, such as, for 
example, contract law, common agric ultural policy, SME policy, or unfair 
commercial practices laws. Most Member States have already enacted specific 
laws dealing with such issues and have established an adequate legal framework 
in the context of their commercial laws . EC competition law is not concerned 
with particular outcomes of contractual negotiations between parties unless such 
terms would have negative effects on the competitive process and ultimately 
reduce consumer welfare. It is not the ai m of EC competition rules, as currently 
devised, to interfere in the bargain stru ck between contractual parties, in the 
absence of proven competitive harm.  
Considerations related to fairness concepts, if at all needed, should be tackled by 
national and possibly EU regulators on th e basis of social in terests, innovation 
and competitiveness of the EU f ood supply chain on world markets.  
5. CONCLUSIONS  
Competition policy plays a key role in ma intaining a level playing field in the 
food supply chain and ensuring that comp etition is not distorted in the food 
sector by any market player operating wi thin the chain: producers, processors, 
traders, wholesalers and retailers. For th is reason, the roadmap set out in the 
Commission Communication on "Food Pr ices in Europe" of December 2008 
called for a pro-active monitoring of th e food supply chain and, where necessary, 
for a vigorous and coherent enforcement of competition rules in food markets by the Commission and National Competition Authorities.  
As a follow-up to this Communication, a nd in order to implement its roadmap, 
the Commission launched a fact-finding exercise involving stakeholders and National Competition Authorities wi th a view to better understand the 
competitive structure, interplay of acto rs and degree of competition in food 
 
EN 29   ENmarkets. Firstly, the Commission held  meetings with relevant European 
associations of producers, processors , traders, wholesalers and retailers 
representing several food sub-sectors, so  as to obtain insights into recent 
economic developments and specific fact ors influencing competition within 
different food supply chains, including cereals and breakfast cereals, milk and 
dairy, livestock and meat processing, pa sta, confectionery, branded foodstuffs 
and beverages, fruit and vegetables, oils and oilseeds, sugar, poultry and eggs. Secondly, given the national or regiona l scope of food retail markets, the 
Commission strengthened its dialogue with National Co mpetition Authorities on 
food related issues in the framework of the European Competition Network 
(ECN). In particular, ECN members  exchanged information on recent 
enforcement, monitoring and advocacy init iatives undertaken at national and EU 
level, as well as on policy issues rais ed by recurrent commercial practices which 
may affect the functioning of food supply chains.  
As evidenced by the significant effort s deployed over the last two years by 
competition authorities, ECN members have granted due priority to case by case 
investigations, as well as to broader inqui ries regarding food markets, which has 
led to the finding of an appreciable num ber of serious infrin gements, such as 
cartels and resale price maintenance ca ses. These infringements were swiftly 
remedied through cease-and-desist ord ers, accompanied where appropriate by 
substantial fines. Such cases spanned a var iety of product markets, such as the 
dairy, milk, flour, bakery, pa sta, eggs, poultry, beef, vege tables, fruit, olive oil, 
chocolate and herbs markets. A number of abuses of dominance cases targeted at the food industry have also been asse ssed in different Member States but 
remained limited in scope. Where National  Competition Authorities applied EC 
competition law, the Commission ensured a consistent and coherent application 
of the rules.  
Moreover, the information shared with  the Commission by stakeholders and 
National Competition Authorities confirms  the view that, depending on the type 
of products involved, food supply chains  are characterized by a high degree of 
complexity and diversity in terms of market structures, number of 
intermediaries operating at different stage s within each chain, size and market 
power of incumbent producers and retaile rs, degree of concentration, entry 
barriers and other factors liable to affe ct competition in the relevant markets. 
Such product-specific structural differen ces are further ampl ified by diverse 
market conditions prevailing across Member States. To reflect such diversities, an important distinction should be made between supply chains for non-processed food (agricultural produce, perishable) and processed food (stockable).  
Overall, supply chains for non-processed food are generally characterized by 
atomized suppliers and stronger buyers who are in most cases intermediary 
operators, and more rarely retailers. Such buyers are often unavoidable trading 
partners for the weakest producers. Giv en farmers' difficulties in aggregating 
their output with complementary products so as to supply retailers directly with the required product ranges, such an aggreg ation function is still largely being 
performed by intermediaries who, however, operate mostly at local level and sometimes at sub-optimal scale. Where it st ill exists, such an overlap of several 
layers of wholesaling may result in struct ural inefficiencies which, in turn, may 
influence negatively price transmission to end consumers.  
 
EN 30   ENBy contrast, within supply chains for pr ocessed food, negotiations generally take 
place directly between producers and larg e retailers. While suppliers of leading 
brands tend to hold a relatively strong bargaining position vis-à-vis retailers, a 
significant number of SMEs active in agro -food industries also enter into direct 
supply relationships with retailers, wh ich adds to the complexity of the 
competitive interactions between produ cers and retailers within supply chains 
for processed food. These transactions ma y entail restrictions of competition 
depending on the nature of the agreements concluded between the parties and on whether the supplier, or the buyer, ha s sufficient market power to maintain 
prices at a supra-competitive leve l to the detriment of consumers. 
Most stakeholders concur in saying that competition between large retailers is 
generally fierce, both between tradit ional supermarkets and increasingly 
between different retail models, including discounters. This has translated into 
relatively low net operating margins for re tailers and has contributed to cheaper 
prices for consumers on the long term. It should be emphasized however that 
retail market structures strongly differ from one Member State to another, due 
inter alia to different regulatory constr aints and local traditions, which implies 
that in certain countries or regions reta il markets may display a lower degree of 
competition between distributors. 
Against this backdrop, it appears that th e ability of suppliers and/or buyers to 
exercise their market power in a manner that would distort competition to the 
detriment of consumers depends, primaril y, on the type of supply chain and on 
local market conditions which, in turn, are the result of structural factors and 
regulatory barriers specific to each Member State. National Competition 
Authorities are therefore well placed to  tackle possible restrictions of 
competition which could affect the functi oning of certain food supply chains. 
In accordance with its Communication of December 2008, the Commission has 
also examined the relevance of certain co mmercial practices both in terms of 
their likelihood to arise and their ability to  raise competition concerns within the 
relevant food supply chains. In addition  to classic cartels and resale price 
maintenance, other practices were quoted by certain stakeholders as deserving special attention by Competition Authorit ies in appropriate cases, and requiring 
a careful balancing of efficiency enha ncing and potentially anti-competitive 
effects. Such practices include joint commercialization agreements, tying and 
bundling, joint purchasing agreements (buyin g alliances) and the increasing use 
of private labels. National Competition Authorities converge in recognizing that 
a case-by-case analysis is required for such  practices, based on the specificities of 
local market conditions. 
In supply chains for non-processed food, joint commercialisatio n or joint selling 
agreements occur with relative fre quency in the context of producer 
organisations. Such agreements may raise concerns for competition when they 
lead to price fixing. Howev er, when they entail an integration of complementary 
assets, they may help the supply of agric ultural produce to become more efficient 
by cutting some of the intermediary st ages that lengthen the supply chain and 
drive prices upwards. Competition Au thorities can therefore assess such 
agreements in a way that can help farmer s to grasp the efficiencies of their 
cooperation, whilst ensuring that benefits are passed onto end consumers. 
 
EN 31   ENFor processed food, tying and bundling, of ten involving branded goods marketed 
by major industrial suppliers, are quoted by certain stakeholders as potential sources of concern. In certain situat ions, such practices may lead to 
anticompetitive foreclosure effects in the tied market, the tying market, or both 
at the same time, and may also lead to higher prices for consumers. In addition, 
foreclosure of competing suppliers may have  a knock-on effect on the revenues of 
upstream producers of agricultural produc ts by strengthening the market power 
of their industrial customers and, as a result, by weakening their capacity to 
negotiate prices with the latter. At the same time, however, tying obligations may 
help to produce efficiencies arising from joint production or joint distribution, and may also help to ensure a certain uni formity and quality standardisation. In 
absence of market power, such efficiency  gains could be passed on to consumers 
in the form of lower pri ces or better products. 
Additionally, certain stakeholders also ref er to the development of transnational 
buying alliances, pointing out that, in certain circumstances, such forms of 
cooperation between large retailers may reduce the participants' incentives to 
expand into each other's domestic markets or may contribute to a 
standardisation of their purchasing policie s, which could have a negative longer 
term impact on product variety and/or th e ability of food s uppliers to innovate. 
While joint purchasing agreements may give  rise to importan t efficiencies, the 
extent to which such benefits are pa ssed on to consumers depends on the 
specificities of each market, as well as on  the scope and type of cooperation that 
takes place within ea ch buying alliance.  
Lastly, another concern raised by some stakeholders is the increased use of 
private labels enabling retai lers to compete with established brands. In principle, 
private labels provide retailers with a way to satisfy consumer demand for cost-
efficient alternatives to branded produc ts, while ensuring value for money and 
quality products. Also, they are the expression of a competitive dynamic which may contribute to rationalizing the food supply chain by allowing retailers to enter into direct procurement and purchas ing negotiations with their suppliers 
and participate in the productive proce ss. However, when the extensive use of 
private labels leads a retailer and it s competing leading brand supplier to 
coordinate their respective pricing an d assortment strategies, in-store 
competition between brands may be res tricted and, absent a sufficient 
competitive pressure from other retail ers, consumers may suffer from higher 
prices or reduced choice for the relevant products. 
It stems from the above that, as re gards these practices, no sweeping 
generalisation can be made and a case by case analysis is necessary in order to 
establish the existence of a possible co mpetitive harm. Competition Authorities 
will continue to ensure a rigorous enforc ement of the rules in all cases where, 
after a careful balancing of efficiency e nhancing and potentially anti-competitive 
effects, it appears that a significant harm for European consumers could result 
from these practices, be it at  Community or national level. 
For this purpose, and as explained above , National Competition Authorities play 
a key role in ensuring the application of  competition rules to anti-competitive 
practices affecting both non-processed and processed food markets. Given the 
national or regional scope of such mark ets, the Commission considers that the 
European Competition Netw ork (ECN) is the appropriate forum to further 
 
EN 32   ENdevelop an efficient and coherent polic y to ensure sound competition in food 
markets throughout the EU. Therefore, fu rther improvements in the cooperation 
between Member States and the Commissio n within the ECN will facilitate the 
development of a common approach to relevant competition issues, the swift identification of problematic cases and an  efficient allocation of tasks amongst 
the ECN members. 
In order to make the best use of the resources and competition expertise of the 
ECN, the Commission has invited National  Competition Authorities to consider 
the possibility of creating where appropri ate joint working teams dedicated to 
the analysis of specific practices and markets which may be critical for the 
functioning of the food supply chain. Going beyond the mere exchange of information, this approach would encompass monitoring, advocacy and enforcement actions geared towards sp ecific product markets and coordinated 
by the Commission with a view to steerin g the collection of relevant information, 
identifying best practices for the prosecu tion of possible infringements. Through 
these comprehensive efforts, the Co mmission and National Competition 
Authorities should be able to better det ect endemic problems specific to food 
markets and promptly coordinate futu re actions, so as to improve the 
functioning of the food supply chain to  the benefit of European consumers.