France creates legal framework for price wars

France implemented a new law, stating that food in supermarket needs to have a 10 % margin at least. This is the country’s attempt to curtail price wars, which also impact farmers.

Fewer discounts

Currently, France does not allow to sell food below its purchase price, but soon, there will be a bottom limit of 110 % of the purchase price. The new law is part of a negotiation that started five months ago, between the French government and the food industry.

Supermarkets will also be forced to pay the farmers the purchase price at least. Nowadays, most farmers have to sell below the manufacturing price, for instance when there is a surplus in supplies. The French government now hopes this will help increase the farmers’ income.

The chain can still boast discounts, but these are now limited. The discount cannot exceed 34 % and the turnover generated from the discounts cannot exceed 25 % of the overall annual turnover.

Higher prices?

It remains to be seen what the measures’ effect will be for the consumer. A lot of supermarket products have margins that exceed 10 %, but supermarkets often try to lure customers with products that have razor-thin margins. This new law will actually increase those prices and it remains to be seen whether the products with higher margins will subsequently get price drops. There is a likely chance that the French consumer will end up paying more for their shopping cart thanks to this legislation.