On Friday, European Union (EU) ministers have plans to urge Brussels to take action against global corporations who impose vastly differing costs on retailers for identical branded goods such as biscuits or chocolates. This practice is believed to cost consumers about €14 billion annually.
A proposal will be presented to the European Commission by eight governments, seeking a strengthening of single-market regulations that deter the so-called “parallel trading”. This relates to situations where a retailer can procure products from another EU state at a lower price.
Mondelez, the producer of brands like Cadbury’s, Toblerone and Philadelphia cheese, was fined €337.5 million on Thursday by the commission. This was due to limiting wholesalers from purchasing biscuits, chocolate and coffee from a member state where prices are lower, for resale in a different state. Margrethe Vestager, the competition commissioner, denoted the ban as unlawful.
However, according to governments and retailers, such practices are prevalent throughout the EU’s single market, which ideally should be free of such trade obstructions within the union.
Smaller states like Belgium, Croatia, Denmark and Greece, are backing a Dutch proposal aimed at terminating these ‘territorial supply constraints’, which they define as ‘varying prices within the EU for identical items’. Notably, Ireland is not among the supporting countries.
The coalition is seeking a clear prohibition on contracts with such terms, as well as an end to obligatory, extensive labelling in local languages, which could be substituted with a QR code, allowing customers to be redirected to a website in their own language.
Investigations into competition like the one involving Mondelez prove to be lengthy and hinge on evidence from hesitant wholesalers and retailers.
“A retail executive, preferring to stay anonymous, commented: “If you attempt to purchase branded goods from a different country, the producer will cease your supply. Big brands are a must to stock.”
According to research conducted by the Dutch government, territorial supply constraints affected 1 in 25 items, causing a 10% price increase on average compared to the cheapest markets. A study carried out by the European Commission in 2020, involving 16 member states, revealed that territorial supply constraints incur costs of €14.1 billion per annum for consumers.
Micky Adriaansens, Netherlands’ economy minister, emphasised that “Eliminating trade barriers should be a crucial objective for the single market. Keeping retail prices for food and non-food items fair is particularly important during times of surged consumer prices.”
The eight European Union member countries are putting forward a substantial plan for a ban on territorial supply limitations within the EU. This would involve modification of current and upcoming unified EU rules or tools, stated an official. In response to a query posed by journalists about whether new regulations were necessary, the official declared it was against the law for traders to face restrictions on purchasing products in one EU country and selling in another.
The official communicated the anticipation that this case could serve as a precautionary measure with additional similar instances pending. Ursula von der Leyen, the President of the Commission, has expressed her commitment towards enhancing the single market and commercial competitiveness if she gets another term post the forthcoming June elections.
In his recent publication, Enrico Letta, the ex-Prime Minister of Italy, brought to focus the subject of purchasing limitations within the single market. Kyriakos Mitsotakis, the Greek Prime Minister and an essential ally in von der Leyen’s European People’s party, has penned a letter to her emphasising immediate action.
In his letter, reportedly viewed by The Financial Times, he stated that Greece and several other member countries combat exorbitant rates for essential consumer goods, notably more than some other EU countries. He advocated for it being necessary that the EU demonstrates to its electorate that it has the ability to take direct, speedy, and effective measures to develop solutions for these issues.
Moreover, Mister Mitsotakis requested a prohibition on the practice of companies retailing the exact product under unique brand names across various member countries. This information is copyright The Financial Times Limited 2024.