In this month's update we focus on competition developments that could impact the retail market.
Following the CMA's publication of their interim report into the power of the digital market we consider the arguments for enhanced scrutiny and regulation. We also consider the European Commission's ongoing investigations into joint purchasing.
We have also launched our 2020 horizon scanner which focuses on the key trends reshaping the industry, alongside all the legal and regulatory changes you need to be aware of.
Focus On Digital
Digital markets are coming under increasing scrutiny from competition authorities around the world and competition laws themselves are under scrutiny to ensure they remain fit for purpose in an increasingly digital world. The European Commission's examination of digital markets include its ongoing investigation into Amazon's business practices and role as a marketplace and retailer.
In the UK the CMA opened a market study into online platforms in July 2019, looking at the market power of online platforms, competition in the supply of digital advertising in the UK and the degree of consumer control over data collection. Its interim report, published in December, proposes a number of potential interventions in the market, including a code of conduct and interventions to address the market power of Google and Facebook. The CMA agrees with Professor Furman and his colleagues (who carried out a wide-ranging review of digital markets earlier this year), that there is a strong argument for the development of a new regulatory regime in this area. The final market study report is due by 2 July 2020. More information here.
The market study is part of the CMA’s digital markets strategy, which sets out its approach to protecting consumers in the digital economy and outlines its strategic aims for action. The strategy responds to the Furman report, which recommended regulatory intervention in digital markets, including the establishment of a specialist "digital markets unit" with the necessary tools to support greater competition and consumer choice. The CMA’s work is still at a relatively early stage, but businesses operating in the digital space should be prepared for increased scrutiny and, ultimately, possible regulatory change and intervention.
The CMA's focus on digital markets should be seen in the wider context of the far-reaching proposals put forward a year ago by CMA Chair Lord Tyrie to the then Business Secretary, Greg Clark, for a shake-up of the UK competition and consumer protection regimes, to address the challenges of digital markets and new forms of consumer detriment. If those proposals proceed to legislation as proposed they would mark a significant shift towards putting the interests of consumers first. For more information see here.
EC investigation into joint purchasing
In November 2019 the European Commission opened an antitrust investigation into the activities of two of the largest supermarket chains in France, Casino Guichard-Perrachon (‘Casino') and Les Mousquetaires (‘Intermarché'), specifically whether they coordinated their activities in an anticompetitive way via a JV launched in November 2014.
Their JV is a buying alliance for the joint procurement of own-branded products. Buying alliances that allow the parties to reduce costs or to innovate can be pro-competitive, provided enough of the benefits are passed on to consumers. However they do carry competition law risks. In this case the Commission is interested particularly in whether Casino and Intermarche have been coordinating their retail networks and pricing policies. The Competition Commissioner Margrethe Vestager has said “Buying alliances between retailers have become a key component of grocery supply chains. They can bring lower prices to consumers for food and personal care brands that they purchase on a daily basis. Such benefits can however disappear quickly if retailers use these alliances to collude on their sales activities.”
Businesses using or considering joint buying alliances should be alive to the competition risks and regularly monitor for any potential spillover activity that could risk infringing competition law. It may be a couple of years before we know the outcome of this investigation, but it will be an interesting one to watch for
Co-Head of Retail & Consumer Sector, Partner, Competition