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Assessment of Buyer Power in Recent Market Investigations and Mergers for the Markets of Retail Distributions 

by Alberto Pera

Published: September, 2010

Submission: September, 2010

 



  


Interest about the relevance of buyer power for competition has been growing in the last decades, as the markets of retail distribution were subject to a process of consolidation, if at different speed, in most European countries. The attention has heightened in the last few years due to a number of factors: inter alia, the level of concentration of the retail sector in many countries (notably the Nordic countries, the UK, Germany, France and Austria), the tendency of food prices to increase and the preoccupation that increased retailers power along the supply chain may have contributed to the rise in prices and to make them sticky.


 


These preoccupations are reflected in recent documents and positions by the European Institutions.1 In this paper we examine how the issue of buyer power has been assessed in some recent market inquiries, mergers and application of competition law by the EC Commission and National Authorities (NCA).


 


1. Buyer power: its definition and role in competition policy


 


a. Definition and origin of buyer power


 


Buyer power is generally recognized as a bilateral asymmetric relation between retailer and supplier, driving from the ability of leading retailers “to obtain from suppliers more favourable terms than those available to other buyers, or which would be expected under normal competitive conditions”, i.e. these conditions do not depend on efficiencies related to size or other factors (Dobson, 2005).


 


Some examples of more favourable terms are: low prices and higher discounts; other contractual obligations and financial benefits extracted from suppliers (such as additional discounts, listing fees, slotting allowances, retroactive discounts, contribution to retail expenses, most favourable treatment clause; shift of risk to suppliers (such as sale-or-return conditions, rebates or discounts related to sale targets, payment delays); limits on range of products offered.


 


for more information go to: http://www.gop.it/doc_pubblicazioni/40_hjv4kr3vun_eng.pdf


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