Closes investigation against Orkla, Mondelez and Norgesgruppen

The Norwegian Competition Authority closes its investigation against Orkla, Mondelez and Norgesgruppen. The Authority has investigated whether differences in purchase prices have violated the Competition Act but has now concluded that there are no grounds to continue the investigation. The Authority will, however, continue to monitor differences in purchase prices.

The Authority conducted dawn raids in the grocery market in November 2019. The dawn raids were carried out after, among other things, findings in the Authority’s survey of purchase prices in the grocery market. The Authority identified considerable differences in the grocery chains’ purchase prices, and that Norgesgruppen generally tended to obtain better conditions from suppliers than the competitors Coop and Rema 1000.

The competition concerns identified by the Authority related to indications that the grocery chain Norgesgruppen obtained better purchase prices from the two large suppliers Orkla and Mondelez than the competing chains, and that this potentially could have short term and long term negative effects for competition and consumers. The Authority has analysed a substantial amount of information that was seized during the inspections.

– After thorough consideration, we have found no basis for continuing the investigation. We have, among other things, considered whether dissimilar conditions have been applied to equivalent transactions, whether dissimilar conditions may have restricted competition, and, if so, whether this could be the result an anticompetitive agreement or an abuse of a dominant position, says Director General Lars Sørgard.

In the grocery market, every grocery chain negotiates with suppliers about prices and other conditions. The grocery chains are different among other things, with respect to assortments, volumes, marketing and in what they otherwise offer to suppliers. These factors can contribute to differences in the chains’ purchase conditions.

– Price differences occur as a result of negotiations, and tough negotiations between suppliers and grocery chains can give the chains lower purchase prices and, thereby, a basis for lowering their prices to consumers. This will benefit customers, even if differences between the grocery chains become considerable. Therefore, there is no general prohibition against differences in purchase prices, says Sørgard.

However, both the Competition Act and the newly adopted Act on Good Commercial Practices in the Grocery Supply Chain, set boundaries for negotiations and competitive conduct, with the view to protect the interest of consumers. The fact that no infringements of the Competition Act has been identified in this specific case, does not mean that differences in purchase prices cannot give rise to competition concerns. Applying dissimilar conditions to equivalent transactions may be in violation of the Competition Act if it harms competition. The Authority will therefore continue to monitor the differences in purchase prices, and also look into why price differences occur.

– The Authority has in particular been concerned that large differences in purchase prices over time can affect the profitability of grocery chains and, thereby, increase the risk that a grocery chain is weakened significantly, and potentially forced to leave the market. This may harm consumers. Even if we have not found any reasons to expect such a development, it is a prioritised task for the Authority to monitor further developments, says Director Magnus Gabrielsen.

The grocery market is a large market, and well-functioning competition in this market is important for Norwegian consumers. The Authority sees several challenges in the grocery market and has established a separate unit, Project Grocery, that works to enhance competition in this field, see facts box. This comes in addition to the Authority’s enforcement of the prohibition of the Competition Act and its review of mergers and acquisitions.