Coop, Norgesgruppen and Rema have engaged in illegal price collusion through the frequent use of price hunters, the Competition Authority concluded today. What does it actually mean for you as a customer? Food researcher Ivar Pettersen and professor of strategy at NHH, Lasse Lien, explains what consequences this can have for your shopping trip, and for the grocery chains themselves. 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. What does the decision from the Norwegian Competition Authority mean? The Norwegian Competition Authority believes that consumers have suffered from the fact that appointed price hunters compare prices in grocery stores, and that this results in higher prices over time. This explains food researcher Pettersen. – This means that there will be some court cases in the future to get it clarified. Why are the prize hunters harmful to competition? In a perfect market, prices would be completely controlled by supply and demand. But in the Norwegian consumer goods market there is much that is different, says strategy professor Lien. The Norwegian grocery market is very concentrated, with Coop, Norgesgruppen and Rema accounting for 95 percent of the market. This is precisely why the sharing of information between them has such a great potential for damage, says the professor. The daily grocery chains use price hunters to check the prices in their competitors’ stores several times a day, the inspections of the Norwegian Competition Authority show. The shelves in the store chains have been checked by prize hunters daily, according to the checks carried out by the Competition Authority. Photo: Simon Skjelvik Brandseth / news – If you know exactly what price changes the other two players are making, there is little temptation to lower the price, since the others will then match the price cut. That quickly kills the incentive to undercut competitors’ prices. In addition, the chains can test a price increase and see if the competitor follows suit, and if they don’t, it’s just a matter of lowering the price again, Lien explains. – This makes it easier to set prices. In other words, it can lead to an increase in prices in the shops. Have the chains actually talked to each other? Not necessarily, is the answer from Professor Lien. – The chains do not necessarily need to talk to each other for this to destroy price competition, he says. By using price hunters who use price scanners, the chains get very precise information about the prices of the competitors in real time. Norgesgruppen, which, among other things, owns the Kiwi stores, Coop and Rema, is blamed by the Competition Authority for operating illegal price collusion. The newspapers themselves say they have done nothing illegal. Photo: Lise Åserud Actually, the question is how much this can destroy the prize competition, says the professor. If something similar had been done in other industries, for example the banking industry, it would have had a completely different effect, he says. – There are so many players there that one will benefit by undercutting other competitors in price. Did I pay too much? – It is difficult to say, says food researcher Pettersen. He says the prices in grocery stores are a matter of costs. Norway is a long country with relatively few inhabitants, and thus it is expensive to operate with everyday products, explains the food researcher. – It is also expensive to produce food in such a country. We have a higher cost level than other countries. There is power in several parts, he says. – There are strong farmers’ organisations, strong industrial enterprises and strong daily grocery players. But it is relatively limited power compared to the costs of running food production and food distribution in Norway. People shop at a grocery store. Photo: Josef Benoni Ness Tveit / news What are the consequences of the fines? Food researcher Pettersen says the decision, if he remains standing, will be a one-off cost for the grocery chains. – But it does not affect the operating costs of the grocery chains in the long term, so I expect that this will have little consequences for pricing going forward. Professor Lien thinks it is unlikely that the bounty hunters themselves will be abolished. – It is not illegal to have people running around to check the prices of competitors, in the same way that nothing can prevent competitors from going online and checking what price level the other party is setting. The grocery chains themselves say that they have not engaged in illegal price collusion. Rema has already said that they will appeal the decision. – The big winners here are probably the business lawyers, who will be mobilized quite strongly to prevent these fines from going through. Will the fines lead to more expensive daily necessities? Lien believes the chains will be keen to make up for lost time, something he believes customers will have to pay for. – Unless the competition forces them to do something else, there is reason to believe that the bill will eventually end up with the customers, says Lien. Nor does food researcher Pettersen think this case will lead to special changes in the prices of everyday goods. The fee from the Competition Authority was originally much higher than today’s fee. Spar is owned by Norgesgruppen, which must now pay NOK 2.3 billion for illegal price collusion with Rema and Coop. Photo: Anne Torhild Nilsen In 2020, the supervisory authority announced a fee of 21 billion to the three grocery chains with debtors that they had made direct agreements between them to limit the competition. – Now they have reduced her, but it is still demanding to prove that this has had something to say about the pricing, says Pettersen. Is this the last word on the matter? It certainly isn’t, says food researcher Pettersen. – It is such a complicated matter. It is important that the Competition Authority has taken up the case, but they have taken a risk of being able to lose in court, because it is a demanding case. He believes that regardless of whether the case falls through or not, it is the right of the Competition Authority to prioritize a case like this. – We have to be on guard when we have so few players in a market, against them coordinating and avoiding a competition they find unpleasant, says Pettersen. All three grocery chains themselves believe that the prize hunters have had a positive effect on the competition. Norgesgruppen has said that it will continue with the price hunters, and Reitan Retail, which owns Rema 1000, has said that it will appeal the decision. Published 21.08.2024, at 19.14
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