Perhaps you have been annoyed by high food prices for a long time. Because even if you are clever and check the prices in different store chains, the prices are more or less the same. As a consumer, you are left checkmate. And it is no accident, we are to believe the conclusion from the Norwegian Competition Authority on Wednesday morning. For years, the competition between the chains has been too bad – and this has led to higher prices. Way back in 2011, the chains agreed to give access to each other’s stores, where they could collect as much of the competitors’ prices as they wanted using a handheld scanner. The practice has limited competition between grocery chains, and the chains have received fees in the billions range. – Weakened competition means higher prices for customers, concluded Supervisory Director Tina Søreide at the press conference. The point of price cuts disappears So how has this led to higher prices? Consider the following: the reason why it can be profitable for a store to cut prices is that you sell more of that item when customers find out that you can buy it cheaper there. But when the competitors can immediately cut the price accordingly, the store does not win new customers – and the price cut is no longer profitable. When competitors can quickly follow suit, there is no longer a good reason to cut prices because everyone loses. Facts about the price hunter case Norgesgruppen, which has stores such as Kiwi and Meny, as well as Coop and Rema 1000 together account for 95 percent of the Norwegian grocery market. 2007: Market research company ACNielsen Norway discontinues its price reporting to Norgesgruppen, Rema, Coop and Ica, after the Competition Authority pointed out that such sharing could harm competition and be illegal. 2010: The daily goods chains enter into the “Industry standard for similar advertising”, where they agree that they can visit each other’s stores to collect prizes for documenting similar advertising – and prize hunters are gradually rolled out. According to the Norgesgruppen, the Consumer Authority participated in the drafting of this agreement, and it was sent to the Competition Authority. 2016: The Norwegian Competition Authority launched a preliminary project to sort out the sharing of information between the Norwegian grocery chains. April 2018: The Norwegian Competition Authority campaigns against the chains, collects evidence and documentation. December 2020: The chains are notified of the inspectorate’s preliminary assessment in the case: the prize hunters break the competition law both in that the collaboration has a competition-limiting “effect” and “purpose”. The authority announces fees totaling NOK 21 billion. January 2024: The Competition Authority drops the most serious debts against the grocery chains. Now they believe that the prize hunters have a competition-limiting “effect”, which is less serious than “purpose”. April 2024: The chains receive notice of a change in fees. Now we are talking about a total of NOK 4.9 billion. August 2024: The notified fee is ready: Coop will receive a fee of NOK 1.3 billion, Norgesgruppen one of NOK 2.3 billion and Rema a fee of NOK 1.3 billion. The chains will also be ordered to end price cooperation and other cooperation with corresponding effects. The chains have the right to appeal the decision to the Competition Appeal Board within 6 months. Both Norgesgruppen and Reitan Retail have said they will appeal the decision. The point of the price cut disappears. The rapid response from the competitors, on the other hand, has made it more attractive to raise prices, the authority believes. When one chain raises its price, the others can follow suit – and everyone makes more per item and no one has a higher price than the others. The chains can also more easily test whether competitors respond to the price increase, and then lower the price again if they do not. It therefore costs little to test increased prices. The inspector’s conclusion is that the practice of price hunting provides incentives to increase prices, rather than cutting them – and that this has led to higher prices. – Competition is when you are unsure of your competitors, said Magnus Friis Reitan in the supervision of the press competition. Exactly how much this has cost in kroner and øre, no one knows. Søreide was clear that she has not calculated the net effect of the practice, but says that it is sufficient to show that it has limited competition. IT IS NOT EASY TO CHOOSE THE CHEAPEST: Customers have been annoyed for years that the prices are almost exactly the same at the three major grocery chains. It is not accidental, writes news’s economic commentator. Photo: Anders Eidesvik / news What is the real problem? So what exactly is the problem with the chains knowing each other’s prices? What is the difference between this and two market traders who sell tomatoes next to each other, and who can constantly adjust to competitors’ prices? The short answer here is probably that size matters. Firstly, these three grocery chains together control 95 (!) percent of the Norwegian grocery market. The Norwegian Competition Authority today referred to the market as a “highly concentrated oligopoly”, which has been important for the assessment in this case. An oligopoly is when most of the supply in a market comes from a few firms. Secondly, the practice of bounty hunting has been very extensive. Price hunters have visited the competitors’ stores several times a day, and scanned all the prices in the entire store. The information about the competitors’ prices has been massive, and the chains have been able to adapt to the competitors’ prices very quickly. The extent of adaptations has been large. The consequence for the three food chains Norgesgruppen, Rema and Coop are fines in the billions: NOK 2.3 billion for Norgesgruppen and NOK 1.3 billion for each of the other two. In 2018, the supervisory authority started securing evidence at the chains, and announced fees of over NOK 20 billion in 2020. Before the summer, the notification of fees was reduced to NOK 5 billion, before the conclusion was reached today. A smoking gun A “smoking gun” was also presented at the press conference, where the inspectorate quoted from an e-mail from one of the chains: “Had the transparency not been there, the creativity in pricing would probably have been greater, to the benefit of the consumer”. it says, among other things. The inspection’s conclusion cannot really be summarized more simply. Now it remains to be seen what happens with the practice in the future. The authority believes that the practice should be discontinued immediately, without being completely precise about what it entails. What is legal, and what is not legal going forward, is another question the chains are asking themselves now. What is the difference between following a price hunt for electronics online, or the prices at petrol stations? It will be a demanding terrain to maneuver in. Hopefully, the competition in the market will be cut better, even if the market dominance between the three chains is total. The question is, however, whether it is at all possible to achieve satisfactory competition in such an extremely tight market. Published 21.08.2024, at 12.04 Updated 21.08.2024, at 12.10
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We have paid too much for food for years – Statement
