On 24 September 2014, the German Federal Cartel Office (“Bundeskartellamt”) published its report on a 3-year sector inquiry into buyer power in the German food retail sector.
The Bundeskartellamt drew the following conclusions from the results of the inquiry:
The German food retail market is highly concentrated. The market structure is at risk of further deterioration. The market is led by few large retail groups with strong bargaining powers in negotiations with suppliers. The retail groups Edeka, Rewe, Aldi and the Schwarz Group with its Lidl and Kaufland supermarkets have a combined market share of about 85% of sales and purchases respectively in the German food retail market. Edeka possesses approximately twice as many sales areas and site density as its nearest competitors and is by far the leading provider in terms of revenues, procurement share regarding manufacturer’s brands (Herstellermarken), sales area and number of sites.
With regard to retailers’ private labels (Handelsmarken), Aldi has an outstanding position. The German retail food sector purchases the vast majority of products within Germany. The relevant geographic procurement markets need to be defined as German national markets and not as European market. The leading retailers, as largest customers of branded products, have structural advantages, horizontally, over their competitors and, vertically, over their suppliers. Very large purchasing cooperatives will, in the long run, continue to strengthen the bargaining position of the market leading retailers. Such close procurement coordination, with far reaching consolidation of company functions, often lead to market shake-out to the advantage of the leading retailers. Further, there are indications that conditions reached by cooperatives which combine market leaders and smaller partners are not always fully shared with the smaller partners.
The leading retail groups are able to make use of their structural advantages in negotiations with brand manufacturers. Only approx. 6% of the sample products analyzed in the inquiry had a brand strength that led to bargaining power on the manufacturer’s side. The inquiry confirmed that smaller retailers, due to lower purchasing amounts, get worse terms than large retailers. Retailers’ private labels (Handelsmarken) become an increasingly important factor in negotiations on purchasing terms and conditions.
The Bundeskartellamt sees the sector inquiry as confirmation to consistently pursue the strict approach which it has taken so far in its case practice. It announced to take decisive action to prevent a further worsening of the competitive conditions. In terms of merger control, every acquisition of a food retailer in Germany by one of the large retail groups Edeka, Rewe and Schwarz Group which is not limited to isolated locations will lead to a deeper analysis of the intended merger. In terms of abuse control, the results of the sector inquiry indicate that Edeka, Rewe, Schwarz Group and Aldi are to be considered as dominant within the meaning of German competition law. Whether certain behaviour can be characterized as abusive depends on the individual case. In July 2014, the Bundeskartellamt already issued a decision stating that the demands made by Edeka on suppliers after its takeover of the Plus stores in 2009 ("wedding rebates") were abusive. As regards cooperation, the Bundeskartellamt said it would revise in detail the effects the new purchasing cooperatives had on the market. These cooperatives include one of the large retailers on sales and purchasing markets respectively. In line with the European Guidelines on Horizontal Cooperation Agreements, the criterion to investigate a cooperation will be a market share of 15% of all participants in the relevant market.
Interested parties, such as market participants, academics, associations and interested political groups have the opportunity to submit written comments on the report by 31 December 2014.
which can be defined as particularly underdeveloped in Italy from a competition viewpoint.
