Abuse of buyer powerAbuse of buyer powerExperience of the Hungarian competition authorityExperience of the Hungarian competition authority

Barbara Zubriczky, investigatorBarbara Zubriczky, investigator

Zubriczky.Zubriczky.barbarabarbara@gvh.hu@gvh.hu

Gazdasági Versenyhivatal,Gazdasági Versenyhivatal, Hungarian Competition Authority Hungarian Competition Authority

BrnoBrno

11th November, 200911th November, 2009

22

FMCG FMCG marketmarket 1. 1.

• market structure – some features:market structure – some features:• concentration of hypermarket retail chains has been concentration of hypermarket retail chains has been

growing constantly since the early 1990’sgrowing constantly since the early 1990’s• swift in market shares:swift in market shares:

• hyper- and supermarkets and discounters: upwardshyper- and supermarkets and discounters: upwards• small shops: downwardssmall shops: downwards

• reasons behind the swift towards large retail chainsreasons behind the swift towards large retail chains• they can effectively coordinate their procurement activitiesthey can effectively coordinate their procurement activities• they offer highly competitive prices for certain goods via which they offer highly competitive prices for certain goods via which

they can reach very price sensitive Hungarian customersthey can reach very price sensitive Hungarian customers• they can relatively easily obtain land for their investmentsthey can relatively easily obtain land for their investments

• retail turnover has been increasing since 2000 (~ retail turnover has been increasing since 2000 (~ has nearly doubled in the past seven years)has nearly doubled in the past seven years)

33

FMCG FMCG marketmarket 2. 2. Estimated market Estimated market sharesshares in the food retail in the food retail

market in Hungary (2008):market in Hungary (2008):

16%

14%

11%

10%

7%

6%

5%

5%

3%

17%Tesco (British)

CBA (Hungarian)

Co-op (Hungarian)

Spar (Austrian)

Reál (Hungarian)

Metro (German)

Auchan (French)

Lidl (German)

Penny Market (German)

Cora (French)

Regulatory background and Regulatory background and introductionintroduction

Market environment: Emergence of large retail Market environment: Emergence of large retail chains in Hungarychains in Hungary

Reactions: Legislative solutions proposed by Reactions: Legislative solutions proposed by trade associations: the ban on sales below cost, trade associations: the ban on sales below cost,

limitation on deadlineslimitation on deadlines

Relevant legislation: Agricultural Regime, Relevant legislation: Agricultural Regime, Hungarian Trade ActHungarian Trade Act

55

Relevant provisions of the Relevant provisions of the new Trade Act I.new Trade Act I.

• Regulates abuses of retailers with significant market Regulates abuses of retailers with significant market powerpower

• Significant market power primarily exists where the net Significant market power primarily exists where the net turnover is higher than HUF 100 billion (appr. 3turnover is higher than HUF 100 billion (appr. 3440 0 million Eurosmillion Euros, , calculated on a quarterly central rate of calculated on a quarterly central rate of 2009)2009)

• Contains list of 9 typical abuses, e.g. unreasonable Contains list of 9 typical abuses, e.g. unreasonable discrimination against a supplier or setting unfair risk discrimination against a supplier or setting unfair risk sharing terms to supplierssharing terms to suppliers

66

Relevant provisions of the Relevant provisions of the new Trade Act Inew Trade Act III..

• SaleSaless below cost is also regulated here. below cost is also regulated here.

• It only captures non-food products, it is only It only captures non-food products, it is only unlawful before the property in the product unlawful before the property in the product has been transferred.has been transferred.

• The procedure is regulated by the rules of the The procedure is regulated by the rules of the Hungarian Competition Act on the prohibition Hungarian Competition Act on the prohibition on the abuse of dominant position.on the abuse of dominant position.

77

Complaints and proceedingsComplaints and proceedingsI.I.

• The GVH received only about 40 The GVH received only about 40 complaints.complaints.

• Seven proceedings have been initiated Seven proceedings have been initiated ex-officioex-officio

1.1. Case relating to the new shelf-filling Case relating to the new shelf-filling system of Tesco - ended with system of Tesco - ended with commitments, the post-investigation is commitments, the post-investigation is completedcompleted

88

Complaints and proceedingsComplaints and proceedingsII.II.

1.1. 1.1. Limiting the number of sLimiting the number of shhelf filling elf filling companies, charging fees for their companies, charging fees for their coordination and for toolscoordination and for tools

1.2.1.2.Commitments: taking into account the Commitments: taking into account the maximal fee to be paid by the suppliers, maximal fee to be paid by the suppliers, providing tools free of charge for shelf fillingproviding tools free of charge for shelf filling, , coordination free of chargecoordination free of charge

1.3. 1.3. Post investigation: all commitments have Post investigation: all commitments have been fulfilledbeen fulfilled

99

Complaints and proceedingsComplaints and proceedings III.III.

2. Case concerning contractual relationship 2. Case concerning contractual relationship between a large DIY store chain, OBI and its between a large DIY store chain, OBI and its suppliers – investigatory reportsuppliers – investigatory report completedcompleted

2.1. 2.1. Setting unfair risk-sharing terms, Setting unfair risk-sharing terms, unilaterally charging feesunilaterally charging fees, , requiring requiring most most favourable termsfavourable terms

2.2. 2.2. Abuse cannot be shownAbuse cannot be shown, OBI , OBI generally generally considers suppliers’ interest considers suppliers’ interest

1010

Complaints and proceedingsComplaints and proceedings IV.IV.

3. 3. Case concerning contractual relationship of Case concerning contractual relationship of Tesco and its suppliersTesco and its suppliers

3.1. Setting unfair risk-sharing terms, retroactive 3.1. Setting unfair risk-sharing terms, retroactive modification of terms of contract, unilateral modification of terms of contract, unilateral charging of certain feescharging of certain fees

3.2. 40 suppliers have been accessed to 3.2. 40 suppliers have been accessed to provide informationprovide information

3.3. Commitments3.3. Commitments

1111

• 4 new proceedings in 2008

• Spar, Metro, Provera, Auchan

• Allegations that standard contract terms and conditions violate the new trade Act

• Ended with commitments, ongoing post-investigation process

Complaints and proceedingsComplaints and proceedings V.V.

1212

Code of ethicsCode of ethics

• The Trade Act requires retailers with The Trade Act requires retailers with significant market power to draft a code significant market power to draft a code of ethics.of ethics.

• They are also required to submit it to They are also required to submit it to the GVH for approval.the GVH for approval.

• In its latest decision In its latest decision the GVH approved the GVH approved the code until 2010.the code until 2010.

1313

Market studyMarket study• Aimed at receiving a sound overview of the Aimed at receiving a sound overview of the

relationship of retailers and suppliersrelationship of retailers and suppliers

• Prepared by the Research Institute of Prepared by the Research Institute of Economics and Enterprise of the Hungarian Economics and Enterprise of the Hungarian Chamber of CommerceChamber of Commerce

• Focus of the study: sales policy of producers, Focus of the study: sales policy of producers, payment conditions, price setting etc.payment conditions, price setting etc.

• Conclusions of the study, secondary analysisConclusions of the study, secondary analysis

1414

Thank you for your attention!Thank you for your attention!