Competition minister wants curbs on grocery chains

Competition minister wants curbs on grocery chains

Lauri Ihalainen

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Minister of Labour Lauri Ihalainen (SDP), who is also the minister responsible for issues of competition, has proposed that regulations against the misuse of a dominant market position should be extended to the food trade.
      Ihalainen feels that officials should take issue with grocery chains whose market shares exceed a certain level, for instance, 30 per cent.
      Under Ihalainen’s vision, the Finnish Competition Authority could be authorised to stop retail chains with a strong market position from taking action that it deems harmful. If necessary the office could bring the matter before the Market Court, which is authorised to impose conditional fines.
     
If the amendment proposed by Ihalainen were included in the law on competition, both the S Group and the K Group of retailers could be placed under closer scrutiny. The S Group accounts for about 45 per cent of Finnish grocery retailing, and the K Group has a 35 per cent share.
      “This kind of a rule would not prevent the largest retail groupings from growing further, but it would give officials better means of supervision and the possibility to intervene in distortions”, Ihalainen says.
     
According to Ihalainen, the definition and boundaries of misuse of a dominant market position are recognised in both Finnish and EU law, so there is nothing radically new in it.
      The rule would mean, among other things, that chains would no longer be allowed to impose unreasonable prices for buying and selling, or restrict production, markets, and technical development to the detriment of the consumer.
      It would also be possible to react to situations in which retailers can impose different kinds of conditions on their trading partners. Retailers would also not be allowed to impose fees on suppliers for promoting their products in the shops.
     
Finland has Europe’s most centralised grocery retailing system, which has boosted the negotiating positions of the S and K groups in discussions with suppliers.
      “There are indications that the strong market positions of the two biggest players disturb the normal operation of the market, or that the markets fail to correct the situation, thanks to the lack of options on the part of suppliers.”
     
Ihalainen would also like shops to agree amongst themselves that individual outlets could include in their selection products that are not part of the normal supply chain.
      He feels that this would make it easier for food produced locally to be available in local shops.
      However, based on his discussions with the wholesale and retail trade, Ihalainen also doubts that the business community has much desire to rectify market behaviour through internal instructions.
     
Another proposal from Ihalainen is a change in the policy for placing retail outlets of the alcohol retail monopoly Alko, whose liquor stores are often located in premises leased from the large chains.
      It is well known that the appearance of an Alko store next door sharply boosts sales at a food outlet.
      As Alko is a state monopoly, the state could influence the location of the shops on the basis of competitive considerations.
      Ihalainen notes that the Finnish foodstuffs industry is partly very concentrated, for which reason the Finnish Competition Authority is investigating the relationship between foodstuffs manufacturing and primary production.


Links:
  Finnish Competition Authority

Helsingin Sanomat