French antitrust authority critical of 'purchase alliances'

French antitrust authority critical of 'purchase alliances'

The French antitrust authority has investigated the purchase alliances created by several large French distributors and feels "wholesale would be better off adjusting the purchase alliances to let competitiveness reign".

4 groups dominate 90 % of the market

On 10 September 2014, French distribution groups Auchan and Système U announced they would join their purchasing efforts, quickly followed by similar statements from Intermarché and Casino, while Carrefour and Cora/Match did exactly the same on 22 December. After that wave of new collaborations, the French government asked the "Autorité de la Concurrence" (the French antitrust authority) for a well-founded and well-documented advice.

 

"Four large purchase alliances (Intermarché-Casino, Carrefour-Cora, Auchan-Système U and E.Leclerc) have basically split 90 % of the market among themselves, as a result of these collaborations", the report begins. The French antitrust authority feels this market concentration is bad news for the sense of competition. 

 

Risks for the free competition

The purchase alliance collaborations may even lead to the exchange of sensitive information (commercial strategy, product range, discount agreement and more). A second issue is that it may endanger the store mobility: competitors belonging to the same purchase alliance will not steal away stores from each other.

 

Suppliers will also be faced with difficulties when no price agreement can be reached during negotiations: if they fail to come to a solution, the supplier will risk losing 2 large distributors. This will weaken the supplier's negotiation position and could perturb the entire market.

 

Some suppliers may even become "economically dependent": as soon as 1 customer represents more than 15 % of a company's turnover, then that is considered to be an economic dependent relationship in France. If that leads to abuse, court cases could soon follow.

 

All in all, the French antitrust authority is therefore asking the distributors and suppliers to adjust the situation and it also warns them that it will keep a close eye on how they adhere to antitrust legislation. The authority has also asked the French government to change the law, giving the authority more leeway to check up on these companies.

 

To be clear: this advice is non-committal and it cannot force the distribution giants to cancel its purchase alliances or force them to change the collaboration. What can happen is that the government uses the advice to change certain pieces of legislation, but it remains to be seen whether Paris is going to do so...

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