It’s not a new topic in the public sphere that prices in supermarkets are high, and many have suspected that retail chains are engaged in price fixing.
Now, the Commission for Protection of Competition (CPC) shares these suspicions, having initiated proceedings against four major retail chains—Delhaize, Mercator S, DIS and Univerexport.
The reason for this action is the Commission’s suspicion of price-fixing agreements on products they have been monitoring, suggesting that these four retail chains have entered into a restrictive agreement.
According to the Law on Protection of Competition, restrictive agreements between market participants are those that aim to or result in significantly limiting, distorting, or preventing competition, and such agreements are prohibited.
The Commission identified several suspicious activities after monitoring these retail chains over an extended period. According to their findings, Serbia’s retail market saw an increase in value from April 2023 to March 2024, accompanied by a slight decline in quantity.
In the same period, retail price increases were nearly twice as high as inflation, the CPC claims.
Looking at a broader period, from 2016 to 2023, there has been a significant increase in revenue and gross margins, or profitability, for these retail chains, as confirmed by data on their operating profits.
What raises particular suspicion is that from April to September of this year, the regular prices of eight selected products—milk, yogurt, oil, flour, sugar, eggs, coffee, and bananas—were the same or similar across all these retailers, despite different procurement conditions.
Additionally, the value of a consumer basket containing 45 selected products differs only slightly between these chains, while being significantly lower at one retail outlet, which is not under investigation, even though it has the least favourable commercial procurement conditions, the CPC pointed out.
Professor Boban Stojanović from the Faculty of Economics in Niš highlights that this level of proactivity from the Commission will attract public attention, as there are few opportunities to learn about the work of an independent regulatory body responsible for overseeing abuses of dominant positions, market concentration, and public and secret agreements that distort fair competition.
He emphasizes that this kind of activity from the Commission should be welcomed, though it also raises several questions.
“In August of this year, top government officials pointed to high retail margins, which have led to higher prices even for essential goods and services compared to both regional and more developed EU countries. This likely signalled the Commission to take action, fulfilling the purpose for which it was established, making this seem like a forced step,” explains Stojanović.
Another possible reason for the Commission’s agility, according to him, is the public competition for a new mandate for members of the Council and the President of the Commission for Protection of Competition, which coincides with the aforementioned dissatisfaction from the authorities. He recalls that on December 29, 2023, a restrictive agreement was established between “Atlantic Grand d.o.o.” and “Strauss Adriatic d.o.o.,” resulting in a collective fine of about 250 million dinars.
“However, two months later, on February 28, 2024, the same Commission practically approved market concentration in the coffee sector, resulting from one company acquiring 100% control over the other,” Stojanović noted.
This, he argues, is one of the reasons why more attention needs to be paid to all the links in the supply chain when it comes to retail.
“This doesn’t excuse retailers, who consistently increase profits by setting high margins, which, as a result, lead to high retail prices and affect consumers’ living standards. High prices in a market economy reflect the levels of supply and demand, leading to the conclusion that in our case, the problem lies in insufficient competition on the supply side and/or high demand,” our interlocutor explains.
What fines could companies face?
Economist Dragovan Milićević told Danas that it is hard to believe there is a written agreement between these four chains.
“It’s probably some sort of tacit agreement, which the CPC might suspect. So far, no such agreement has ever left a written trace,” he explains.
If the Commission has any valid evidence, according to him, it can take concrete measures to protect competition, treating these as illegal actions that hinder market competition, and it can impose fines as defined by the Law on Protection of Competition.
“The law doesn’t specify exact fines; instead, the Commission issues rulings that can be processed by the courts. Article 68 of the law stipulates that the maximum fine can be up to 10% of the company’s annual revenue, but as far as I know, no one has ever paid such a fine,” Milićević emphasizes.
If the maximum fine were imposed, it would be a significant blow to these retail chains.
According to financial reports, Delhaize had the highest revenue in 2023, totalling 1.35 billion euros. Behind them is Mercator S with 885 million euros in revenue, followed by DIS with 234 million euros, and finally, Univerexport with 325 million euros.
Therefore, Delhaize would face a fine of 135 million euros, Mercator 88.5 million, DIS 23.4 million, and Univerexport 32.5 million euros.
In total, these four retail chains could have to pay around 280 million euros.
(Danas, 15.10.2024)