Science - February 28, 2013

Power of the supermarkets

The supermarkets abuse their market power, an EU advisory body has noted. Suppliers are paid less than was agreed and contracts with them are regularly broken. It is true, says researcher Maria Litjens of the Law and Governance chair group.

Litjens is doing her PhD on the food chain and confirms that the supermarkets have a lot of power. The more than 20 Dutch supermarkets buy their food in through three large buyers' groups which purchase 80 percent of Dutch food. She is often told that these buyers cut prices unilaterally and demand a contribution to the advertising and marketing costs.
Is that an abuse of power?
'That is the tricky thing. In the Netherlands there is freedom of contract. You can agree on almost anything you like in a contract. But breaking contract is illegal. The fact that 84 percent of the suppliers have been subject to broken contracts and have accepted it, according to the EU, exposes their dependant position.'
So why doesn't the Dutch competition authority NMA take action?
The competition rules forbid the abuse of a powerful economic position but it is a difficult thing to prove. Then there is the fact that the NMA and the European Commission have detailed the abuse of power by one company - Microsoft - but not of several companies together. At present, if several parties are involved only the ban on cartels is applied; companies are not allowed to make deals between them. But if three companies are all big players they can just watch how the others go about it. You don't have to make formal deals to copy each other's practices.'
What should happen now?
'Binding legislation is needed. We should breathe new life into the existing law against the abuse of power by several companies together. It shouldn't be the victims who have to go to court about the abuses; the government should take on the role of plaintiff. That means the NMA and the ministry of Economic Affairs should actively oppose the abuse of power in the food chain.'   

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