(The newspaper online): The tone between the Consumer Council and the Norwegian Competition Authority is getting sharper.
The two completely disagree on what needs to be done to improve competition in the grocery market.
The Consumer Council is now presenting numbers that they think may be important for action to be taken. The Consumer Council also criticizes the Norwegian Competition Authority for not providing enough information.
– They don’t want to say
Norway’s grocery market features three giants, Norgesgruppen being by far the largest with over 40 percent of the market. Norgesgruppen owns chains such as Kiwi, Meny, Joker and Spar.
The Norwegian Competition Authority determined in 2019 that Norgesgruppen’s buying conditions are up to 15 per cent better than their competitors.
But then, the Norwegian Competition Authority did not want to say how much better conditions Norgsgruppen enjoyed.
– The Norwegian competition authority knows, but won’t say, how huge Norgesgruppen’s purchasing advantage is. Consumers Council director Olaf Kasland says it deprives the authorities of much of the decision-making basis needed to impose a ban on unjustified purchase price differences.
Read the strong reaction of the Norwegian Competition Authority in more detail: – They represent us as a party.
The Business Secretary has a regulation on prohibiting unreasonable price discrimination. The Norwegian Competition Authority opposes this, while the Consumer Council supports it.
– It is important because we want more players in the grocery industry. We wouldn’t have it if the buying ratio between Norgesgruppen and everyone else was too great, says Kasland.
The Norwegian Consumer Council wants more transparency about the size of the differences between the chains.
– The accounts can show what the Norwegian competition authority wants to keep for itself, he says.
Precisely for this reason, the Norwegian Consumer Council considered the accounts of the big three in the grocery market:
- Norwegian Group (Kiwi, Mini, Spar, Joker)
- Rima 1000
- Coop (Extra, Prix, Mega, Obs)
The Consumer Council has found figures showing what is left of chains after the cost of goods has been paid, and the Consumer Council refers to this as the gross margin.
Norgesgruppen has a significantly better gross margin than the others, which may indicate that Norgesgruppen is getting better buying conditions, the Consumer Council believes.
Gross margin variances are sometimes significant.
- Norwegian group 26.2 per cent
- Rima 1000 22.1%
- Cooperative: 18.2%
Read further down how Norgesgruppen thinks the Consumer Council is so wrong: – No, no, no!
It is difficult to draw strong conclusions due to differing business content and ownership models. That said, it’s not surprising that gross margins in the accounts seemed to align with the competition authority’s results. The figures show that Norgesgruppen’s purchase prices are lower than its biggest competitors, says department manager Olaf Kasland.
Industry Minister Jan Christian Pfister has begun studying profitability in the grocery industry.
A study of profitability in the grocery industry should usefully accommodate differences in wholesaler firm models, says Casland.
This could provide insight into how harmful Norgesgruppen’s buying advantage is over the competition, he says.
The Consumer Council is very interested in the competitive situation in the grocery market.
– The Consumer Council fears that we are more likely to end up with two national wholesale chains in Norway than with four. So it’s important that a player doesn’t get such a high price that it becomes impossible to catch up, says Kasland.
– They represent us as a party
– The way the Consumer Council speaks, they present us as a party, and we are not, says Beat Milford Berfjord, director of the Department for Food, Trade and Health at the Norwegian Competition Authority.
– Our job is to find out the best to compete. We wish the Consumer Council would take the lead, she says.
Competition Norway will not comment on Consumer Council numbers, but Competition Norway itself is conducting a major sideline study.
– We are now in the process of looking for a way to give us answers that are as free of “noise” as possible, so that we get the best possible information. The survey must be completed within the year.
– Why can’t you quantify the differences in purchase prices?
– We sit on large amounts of information and then say as much as possible about the differences in purchase prices. We cannot say more than that, and then we will reveal business secrets, and this can be directly harmful to the negotiations, you say.
– You said what are the differences before, so why don’t you say it now?
– After we published the numbers, we received feedback that it had damaged the negotiations.
How did you damage the negotiations?
– Prices can go up
– This information can be used by the parties in a way that allows prices to rise. Berrefjord responded that we have received feedback from several different parties on this matter.
The Consumer Council believes that authorities get a weaker basis for decision-making when they don’t want to say what the differences are. Are they wrong?
– We express ourselves as the highest professional authority regarding competition in the Norwegian grocery market, and when we advise against introducing a regulation, we assume that everyone understands that because we believe that a regulation would harm competition. We have no other interest in this than to avoid Norwegian consumers having to pay more for their food.
– The minister can see
– But can the Minister of Business and Industry know the differences if he wants to?
– Administration law places limits on who we can share information with. If it comes to a head, it is likely that Vestry, in his capacity as minister to our ministry, will ask for some insight into the numbers, says Berefjord, and continues:
– but he never asked, nor did he want to be able to share numbers with others, as they are a business secret. We feel that he and the Ministry have confidence in our work, and that the results we deliver are based on solid professional foundations.
The Norwegian Competition Authority has given its clear advice to the Minister regarding the regulations on unfair price discrimination.
– On professional grounds, we believe that there is a risk of price hikes if a regulation on price discrimination is introduced. The Consumer Council has a different view. But we understand that other professionals who have spoken out, with the exception of those hired by the Rema 1000 company, are of the same opinion, namely that regulation is not the answer to the challenges in the grocery market.
Norwegian group: – No, no, no!
– No no no, that would be completely wrong, says Nogesgruppen’s Communications Director Stein Rømmerud.
– Apples are not compared here. He says that the gross margin is the difference between the purchase price and the retail price.
The cost of the goods is the same as the purchase price.
It is believed that the Consumer Council’s figures say nothing about purchase price differences.
The only people who know the real difference is the Norwegian Competition Authority, and they should have that vision, says Romerod
Transparency is harmful
He believes that openness can be harmful.
Transparency about purchase prices would harm competition and remove the incentive for intense competition. Romero says this will lead to weaker competition and higher food prices.
He cites several reasons for the incorrect use of the numbers indicated by the Consumer Council:
– If you have three absolutely identical companies with absolutely identical operating methods, completely identical cost profile and completely identical customer groups, it makes sense to see if the gross margin refers to the difference in purchase prices. But remember, there are huge differences between these three players, says Romero.
He believes that different types of chains have an effect, too.
– You can’t compare a low-priced operator with one that has full-range supermarkets, low-priced kiosks and a completely different offer, and there’s a big difference in where ownership ends up. For example, if a player has a larger share of the stores owned by him in the endgame, that has a lot to say, says Romerod.
– If you own production companies, they have very different gross numbers than a retail company. Norgesgruppen has a number of production companies in our numbers, he says.
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