1. Abuse of buyer power Experience of the Hungarian competition authority Barbara Zubriczky, investigator Zubriczky.barbara@gvh.hu Gazdasági Versenyhivatal, Hungarian Competition Authority Brno 11th November, 2009

2. 2 FMCG market 1. market structure – some features:market structure – some features: concentration of hypermarket retail chains has been growing constantly since the early 1990’sconcentration of hypermarket retail chains has been growing constantly since the early 1990’s swift in market shares:swift in market shares: hyper- and supermarkets and discounters: upwardshyper- and supermarkets and discounters: upwards small shops: downwardssmall shops: downwards reasons behind the swift towards large retail chainsreasons behind the swift towards large retail chains they can effectively coordinate their procurement activitiesthey can effectively coordinate their procurement activities they offer highly competitive prices for certain goods via which they can reach very price sensitive Hungarian customersthey offer highly competitive prices for certain goods via which they can reach very price sensitive Hungarian customers they can relatively easily obtain land for their investmentsthey can relatively easily obtain land for their investments retail turnover has been increasing since 2000 (~ has nearly doubled in the past seven years)retail turnover has been increasing since 2000 (~ has nearly doubled in the past seven years)

3. 3 FMCG market 2. FMCG market 2. Estimated market shares in the food retail market in Hungary (2008):

4. Regulatory background and introduction Market environment: Emergence of large retail chains in Hungary Reactions: Legislative solutions proposed by trade associations: the ban on sales below cost, limitation on deadlines Relevant legislation: Agricultural Regime, Hungarian Trade Act

5. 5 Relevant provisions of the new Trade Act I. Regulates abuses of retailers with significant market powerRegulates abuses of retailers with significant market power Significant market power primarily exists where the net turnover is higher than HUF 100 billion (appr. 340 million Euros, calculated on a quarterly central rate of 2009)Significant market power primarily exists where the net turnover is higher than HUF 100 billion (appr. 340 million Euros, calculated on a quarterly central rate of 2009) Contains list of 9 typical abuses, e.g. unreasonable discrimination against a supplier or setting unfair risk sharing terms to suppliersContains list of 9 typical abuses, e.g. unreasonable discrimination against a supplier or setting unfair risk sharing terms to suppliers

6. 6 Relevant provisions of the new Trade Act II. Sales below cost is also regulated here.Sales below cost is also regulated here. It only captures non-food products, it is only unlawful before the property in the product has been transferred.It only captures non-food products, it is only unlawful before the property in the product has been transferred. The procedure is regulated by the rules of the Hungarian Competition Act on the prohibition on the abuse of dominant position.The procedure is regulated by the rules of the Hungarian Competition Act on the prohibition on the abuse of dominant position.

7. 7 Complaints and proceedings I. The GVH received only about 40 complaints.The GVH received only about 40 complaints. Seven proceedings have been initiated ex-officioSeven proceedings have been initiated ex-officio 1.Case relating to the new shelf-filling system of Tesco - ended with commitments, the post-investigation is completed

8. 8 Complaints and proceedings II. 1.1. Limiting the number of shelf filling companies, charging fees for their coordination and for tools 1.2.Commitments: taking into account the maximal fee to be paid by the suppliers, providing tools free of charge for shelf filling, coordination free of charge 1.3. Post investigation: all commitments have been fulfilled

9. 9 Complaints and proceedings III. 2. Case concerning contractual relationship between a large DIY store chain, OBI and its suppliers – investigatory report completed 2.1. Setting unfair risk-sharing terms, unilaterally charging fees, requiring most favourable terms 2.2. Abuse cannot be shown, OBI generally considers suppliers’ interest

10. 10 Complaints and proceedings IV. 3. Case concerning contractual relationship of Tesco and its suppliers 3.1. Setting unfair risk-sharing terms, retroactive modification of terms of contract, unilateral charging of certain fees 3.2. 40 suppliers have been accessed to provide information 3.3. Commitments

11. 11 4 new proceedings in 2008 Spar, Metro, Provera, Auchan Allegations that standard contract terms and conditions violate the new trade Act Ended with commitments, ongoing post- investigation process Complaints and proceedings V.

12. 12 Code of ethics The Trade Act requires retailers with significant market power to draft a code of ethics.The Trade Act requires retailers with significant market power to draft a code of ethics. They are also required to submit it to the GVH for approval.They are also required to submit it to the GVH for approval. In its latest decision the GVH approved the code until 2010.In its latest decision the GVH approved the code until 2010.

13. 13 Market study Aimed at receiving a sound overview of the relationship of retailers and suppliersAimed at receiving a sound overview of the relationship of retailers and suppliers Prepared by the Research Institute of Economics and Enterprise of the Hungarian Chamber of CommercePrepared by the Research Institute of Economics and Enterprise of the Hungarian Chamber of Commerce Focus of the study: sales policy of producers, payment conditions, price setting etc.Focus of the study: sales policy of producers, payment conditions, price setting etc. Conclusions of the study, secondary analysisConclusions of the study, secondary analysis

14. 14 Thank you for your attention!