Final Report on Commercial Relations Between the Large Retail Groups and their Suppliers

The aim of this market study is to give as detailed picture of the food supply chain in Portugal, particularly regarding the commercial relations between the so-called Large Retailing Groups (LRGs) and their suppliers of food products.
The commercial relations between the so-called Large Retail Groups (LRGs) and their suppliers have been the subject of debate in Portugal for a number of years now, as they have been in many countries across Europe. The issue has surfaced again recently with many factors coming together, namely: the growth of LRGs; the imbalance in bargaining power, with suppliers on the downside; the reform of the Common Agricultural Policy (CAP); and the volatility of prices for certain foodstuff on
international markets.
 
It was against this backdrop that the Portuguese Competition Authority (AdC) decided to undertake this market study. The aim of this market study is to give as detailed picture of the food supply chain in Portugal, particularly regarding the commercial relations between the so-called Large Retailing Groups (LRGs) and their suppliers of food products.
 
The report analyses the behaviour of the nine LRGs operating in Portugal, covering a representative sample of what are generally referred to as “fast moving consumer goods” (FMCG). This includes dairy products (UHT milk, yoghurts, cheese and butter), rice, pastas, flour, breakfast cereals, biscuits, vegetable oils (seed-oils, olive oil and margarine), fruit and vegetables, and soft drinks, coffee and substitutes.
 
On the basis of the market study carried out, and the legal framework, both domestic and European, the AdC believes that it would be helpful to put forward a raft of recommendations geared to promoting a culture of competition, which will contribute to a more balanced and transparent bargaining power and an effective proactive position taken by the authorities that have jurisdiction in the matter.
 
All the recommendations should be duly framed within the scope of the discussion on the food supply chain issues which have been taking place in the European Union, specifically within the context of the work undertaken by the European Council, the European Commission and the
European Parliament.
 
The recommendations cover a range of topics, specifically: (i) Promotion of a culture of competition through self-regulation based on a code of conduct acceptable to all parties; (ii) An analysis of the opportunity to draw up regulations on debatable trade practices that do not fall within the existing competition legislation or the legal framework covering restrictive practices, and where there is no possibility of agreement through self-regulation; (iii) Reinforcement of the collection, treatment and dissemination of statistical data for prices and quantities along the food supply chain.
 
Some additional recommendations are as follows: Placing a greater emphasis on supervising compliance with legislation covering restrictive trade practices; Taking measures that encourage the creation of small/medium-sized commercial units in local markets; Have na independet consultant carry out an analysis on the impact on consumer welfare of “look alike” and “copycat” products; Giving priority to transposing to domestic legislation the next directive from the European Commission and the European Parliament on payment terms for commercial transactions; and promoting a proactive participation by the competent Portuguese authorities on the work undertaken by European institutions that deal with issues related to the food supply chain and the large retail sector.