A sharp increase in the market shares of the big chains and excessively high food prices has led to the creation of a special strike force, while anonymous whistleblowers are encouraged.
Fifteen years after its two decisions on the supermarket cartel, the Competition Commission is re-branding the sector, finding that in recent years the rapid restructuring that has occurred, with the collapse of large chains (Marinopoulos, Veropoulos) and the redistribution of the pie have led to an increase in the degree of market concentration, while the prices of food and non-alcoholic beverages are too high in the Greek market, compared to European countries with a comparable income.
For many years, starting with the 2001 revelations about the meetings at the Sofitel hotel, the Commission had dealt with infringements of competition rules by supermarket chains and their association and had issued two relevant sanctions decisions ( decision 277/ 2005 and decision 284/2005). Now the Commission is returning to competition issues in the sector, having completed a major inquiry published yesterday which looked into the conditions of competition in essential goods sold by supermarkets.
The general conclusion of the research is that competition works relatively satisfactorily, but the significant increase in the degree of concentration in recent years, as well as the high level of prices, is problematic.
The supermarket market in Greece is not yet considered significantly concentrated according to the Competition Commission . However, it is observed that in 2019, the ten largest companies gather approximately 85-95% of the market , while the four largest companies gather 65-75% of the market, with their market shares now ranging from 10-15% to 25 -35%, percentages which are significantly increased and may create concern for unfair practices in the future. The Competition Commission points out that the possibility of new companies entering the sector is quite limited.
The increase in industry concentration in recent years has been quite steep. The four largest groups in 2013 , namely AB VASSILOPOULOS, MARINOPOULOS, SKLAVENITIS and Lidl gathered 45-55% of the market and in total the 10 largest companies gathered almost 75-85% of the market. In 2019, six years later, and after large chains, such as Marinopoulos and Veropoulos, had left the market, the four largest companies are now SKLAVENITIS, AB VASSILOPOULOS, Lidl and METRO which collect 65-75% of the pie and the ten large companies now gather about 85-95% of the market.
The Competition Commission finds that food prices in Greece are considerably higher than the level of other countries with a comparable national income. As shown in the table, compared to the other seven countries that are close to Greece’s GDP, as a percentage of the European average, in our country the prices of food and non-alcoholic beverages are the highest, reaching 103.5% of the average EU terms The price level in this category can be compared to that of Cyprus and Italy, countries which have a higher volume index per capita GDP.
In particular, the price level index for the individual categories that fall under the “Food” category were as follows: Bread and Cereals (109%), Meat (90%), Fish (102.9%), Milk, cheese and eggs (133 %), Oils & fats (112.4%), Fruits – Vegetables – Potatoes (82.9%) and Other foods (133.7%). While Greece falls short of the European average, in terms of the volume index of GDP per capita, the price level in food (with the exception of the categories Fruit, Vegetables, Potatoes and Meat) is quite higher than the European average and in the case of the category “Other food” reaches 133.7% of the European average .
According to Nielsen data, the Competition Commission report notes that Greece was more expensive than Belgium, Germany, Spain, France, Italy, the Netherlands, Austria and Portugal in baby food, oil and fat, sugar and jams and canned goods
The profitability of the sector showed increasing trends in the five years under review, with the average gross profit margin of the sector from 18.9% in 2014 increasing to 23% in 2019 . The profitability of the 12 largest companies in the sector moves at similar levels, where the index stabilized and finally rose to 23.6% in 2019 from 21.9% in 2015.
Strict surveillance framework
The Competition Commission puts the industry under close surveillance, both to monitor how competition is developing and by trying to “fish” information about illegal practices from witnesses whose anonymity will be protected (whistleblowers). Particularly,
- A special task force for supermarkets is being created at the Directorate General for Competition. As announced, “continuous monitoring of the sector by the EA is deemed necessary, both for the consumer products examined in the context of this Sector, and for other products, food or other consumer items. This project will be undertaken by a Supermarket Taskforce which will be set up in the Directorate General of the Competition Commission and which will prepare every 12 months a report to the President of the Commission on the state of competition in the retail sector and will proceed with measurements of bargaining power of supermarket chains and suppliers’.
- A special anonymous information provision system is being created. According to the Commission, “in order to deal with unfair commercial practices by companies with significant bargaining power, it is deemed necessary to strengthen the control mechanism of the EA. through the use of direct information digital technologies, through complaints or through systematic market monitoring. For this purpose, E.A. proceeds to create a system of anonymous information provision (whistleblowing), thus providing the possibility for someone to provide information without fear of revealing their identity in any way”.