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Improved Competitive Conditions in the Market for Wholesale of Groceries to Independent Retailers

30. august 2007

4/0120-8901-0182/FI/TS The Council meeting August 30th 2007

On August 30th 2007, the Danish Competition Council has adopted a decision that renders legally binding commitments from SuperGros a/s (SuperGros) concerning SuperGros’ standard terms for customers. The Danish Competition Authority (DCA) expects that the commitments will improve competition in the market for wholesale of groceries to independent retailers in Denmark.

SuperGros is part of the Dagrofa group of undertakings, one of the largest groups of undertakings in the Danish groceries industry. SuperGros operates within the area of wholesale of groceries in Denmark. SuperGros’ standard terms regulate the relations between SuperGros and independent retailers within the market for groceries.

The Danish Competition Authority has defined the market as being wholesale of groceries to independent retailers in Denmark. The largest competitor in this market is Edeka which is a full range wholesaler like SuperGros. However, due to among other things the long term of notice, the competition between SuperGros and Edeka takes place in the long run. In the short run, the full range wholesalers compete with niche suppliers which only supply limited parts of the full groceries product range.

The standard terms for 2006 included the following conditions which the DCA found problematic in relation to the competition rules:

  • A price system which in practice worked in the same way as a progressive, retro-active rebate system with a “rebate span” of 14-17 percentage points. Consequently, the price system could possibly create loyalty effects preventing niche suppliers and new entrants from competing at equal terms, thereby harming competition.
  • Conditions which committed customers to buying deep-frozen and cooled food commodities exclusively from SuperGros. These conditions could preclude competitors in the market of wholesale of deep-frozen and cooled food commodities.
  • A term of notice of 6-18 months. The length of the term of notice could limit competition between full range wholesalers, by making shifts from one full range wholesaler to another difficult.

Even though SuperGros did not agree with these assessments, a solution was reached through negotiations between the DCA and SuperGros. SuperGros has made binding commitments, which will remain in force until December 31st 2009, involving the following changes in SuperGros’ standard terms to its customers:

  • SuperGros’ price system is replaced by a new price system. In the new system there is only one single price for each (single) product code. In addition, there is a volume rebate with a “rebate span” of 5 percentage points. Finally, the new system operates with a number of fees involving some (non-discriminative) degree of price differentiation between customers of different size. Also, the new fees create incentives at retail level to make more rational purchases. The DCA finds that the possible loyalty effects on customers of the old price system are radically reduced.
  • Conditions, committing customers to buying deep-frozen and cooled food commodities from SuperGros exclusively, have been removed from SuperGros’ standard terms.
  • SuperGros’ term of notice period is shortened and is now 6-9 months.

The commitments given by SuperGros meet the concerns of the DCA, and it is the expectation of the DCA that the commitments will improve competition in the market for wholesale of groceries to independent retailers in Denmark to the benefit of the consumers.