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Sector inquiry "Buyer power in the food retail sector"

Date of issue: 24.09.2014

Today the Bundeskartellamt published its report on the sector inquiry into buyer power in the food retail sector. The inquiry focuses on the conditions of competition between the food retail companies on the one hand and their suppliers on the other.

Andreas Mundt, President of the Bundeskartellamt: "The German food retail market is highly concentrated. Edeka, Rewe, Aldi and the Schwarz Group with its Lidl and Kaufland outlets make up approx. 85% of the market. As the retailers purchase their products primarily in Germany, it is crucial to assess the domestic market conditions. The sector inquiry shows that we must take decisive action to prevent a further worsening of the competitive conditions. The large retail groups already have a huge lead over their small and medium-sized competitors and can make use of their structural advantages in negotiations with manufacturers. In individual cases even large manufacturers with well-known brands can be exposed to the retailers' bargaining power if in fact there are no outside options available to them other than selling their products through the large retail chains. The retailers' private labels have also become an increasingly important factor in negotiations on purchasing terms and conditions."

Buyer power in the food retail sector has been the subject of many complaints received by the Bundeskartellamt. In a number of proceedings conducted by the authority the issue of buyer power has already been examined under competition law, e.g. in the Edeka / Trinkgut merger proceedings, the examination of the planned purchasing cooperation between Rewe and Wasgau and, most recently, in the abuse control proceedings against Edeka on account of its violation of the prohibition of inducing suppliers to grant benefits without any objective justification (so-called "Anzapfverbot"). The issue has become the subject of intensive political debate. At the European level this has already resulted in more concrete calls for the provision of rules or commitments by the companies themselves to abide by "fair practices" in negotiations.

Andreas Mundt: "With the sector inquiry we have presented a robust factual basis for our own case practice in merger control and abuse control and for further discussions on buyer power."

The results of the sector inquiry prove that
- the highly concentrated market structure of the food retail sector is likely to deteriorate even further,
- the large retail companies can make use of their structural advantages in their negotiations with brand manufacturers,
- the strict approach taken by the Bundeskartellamt in its case practice must be consistently pursued.

Over a period of three years the Bundeskartellamt has examined the market structures in the German food retail sector and has focused in particular on the negotiations between food retailers and brand manufacturers. The authority requested information from more than 200 manufacturers and 21 retail companies and carried out a comprehensive evaluation of the answers received. This was followed by an econometric analysis of approx. 3,000 concrete negotiations on the basis of a representative sample of 250 branded products from different product categories. The authority processed approx. 65,000 data sets including a large number of individual data.

A brief overview of the survey (in German) is available in the annex to this press release: "Ergebnisse und Schlussfolgerungen.

A summary of the sector inquiry (in English) is available here.

The complete text of the report (in German) can be found here.

The English versions of the overview will soon be available on our website.

The Bundeskartellamt considers this report as a basis for further discussion with the market participants, academics, associations and interested political groups. All interested parties have the opportunity to submit their written comments on the report by 31 December 2014.

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