On Thursday, Industry Minister Jan Christian Vestre and Agriculture and Food Minister Sandra Borch called in the players in the grocery industry to talk to them about price increases on food products. The background is the very sharp increase in the price of food of 11.5 per cent in the past year. That makes the Minister of Business and Industry worried. Hence this meeting. But what can the West really do? What tools does he have? No! That’s the short answer. Playing on the conscience It is therefore no coincidence that he formulates himself like this: – We want to encourage all players to show their social responsibility and curb inflation as much as possible, he said after the meetings. Industry Minister Jan Christian Vestre and Agriculture Minister Sandra Borch met the press after the meetings. Photo: Gorm Kallestad / NTB Namely. Here he plays on his conscience and social responsibility, because that is strictly speaking the only thing he has to play on. Vestre doesn’t have a chainsaw. He could almost as well have written a letter with the text: “Dear grocery players, please don’t raise the prices.” That would have been good. Greetings Jan Christian”. Ok, so maybe it’s a bit sloppy in summary, but there is still something in it: He has no way of ordering the actors to moderate themselves. There is no price lock or chainsaw that Vestre can use to stagger the price gallop. Vestre’s empty toolbox is only emphasized by the measures he puts forward after the meeting: Margin study to see where the margins in this value chain will be. On the other hand, they are a way of showing the Norwegian people that “look here, now we are trying”. The danger with such actions is that it can appear as populism and symbolic politics, or even worse; that they have no competence or understanding of how the market works. Listening government The government can, if they are lucky, be perceived as listening and open to input related to issues in the grocery market that the players are concerned about. Topics such as own brands (“private label”) or the chains’ bargaining power, and how it can be regulated. Orkla CEO Nils Selte will attend the meeting. Photo: Thomas Brun / NTB This is a good opportunity for the actors to air their concerns in private, as the actors meet the ministers separately and not together. The fact that you meet one to one, and not two producers together, for example, is linked to the very strict rules for price cooperation. Meeting several people together would therefore have been completely pointless. Sandwich list with reasons Vestre was probably served a sandwich list of reasons why prices will have to rise a lot in the future as well. High raw material prices, more unstable value chains and increased electricity prices were guaranteed to be a recurring theme at the meetings. It would also not be completely unthinkable that someone pointed out that an expensive agricultural settlement will raise the prices of meat, milk and eggs. And there the finger will be pointed straight back at the government. Have tried this before So what can the result be? We can hardly hope that it will be like in 2014 when then competition minister Monica Mæland and finance minister Siv Jensen were worried and called in the four big petrol companies for “a talk about fuel prices”. Former director of competition supervision Lars Sørgard. Photo: Marit Hommedal / NTB In an article in DN a few days after the meeting, Tommy Staahl Gabrielsen (University of Bergen), Erling J. Hjelmeng (University of Oslo) and Lars Sørgard (Norwegian School of Economics) wrote the following: “We understand that politicians have needs to show action. The problem is that this need for attention also comes at a price. Such meetings with subsequent press conferences give competitors valuable opportunities to signal their future strategies, and this can quickly lead to reduced competition and higher prices rather than the opposite. Politicians with a need to show action and visibility in the media are therefore the last thing we need in such situations”. Equally valid for groceries This was about petrol, but is equally valid for groceries. Even if they do not sit in the same meetings, any statements from the players who have been inside the ministers will be read carefully by the competitors. If it seems that everyone confirms that food prices will continue to rise significantly in the future, then the uncertainty about what the competitors will do will be reduced. Such security is perhaps the last thing we consumers want the grocery players to get right now.
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“Dear grocery store, please do not increase prices” – Statement
