On April 13 2011 the Food Chain Committee delivered its report on the Norwegian food value chain and its impact on the relationship between producers, suppliers and grocery retailer chains, as well as on consumers' interests. The report identifies several challenges within the chains and suggests a variety of ways to improve competition between, in particular, the grocery retailer chains.

In February 2010 three Norwegian ministries jointly appointed the Food Chain Committee, instructing it to conduct an analysis of market power in the Norwegian food value chain. The committee was not instructed to make a pure competition-based analysis, but rather was asked to analyse the relative strengths in the value chain and to suggest measures to increase consumer influence in terms of price, quality, selection of goods and availability. In addition, it was asked to propose measures to ensure transparency among other things.

Four major food retail chains dominate the Norwegian grocery retail market. This has led to a number of competition law-based challenges, as well as having an impact on consumer interests. The narrow selection of goods, combined with high prices, has been the subject of animated debate and has raised concerns, and the committee confirmed the lack of broad selection and diversity in grocery stores. The committee also confirmed the relatively high prices that exist in the Norwegian grocery market. However, it observed that even though it cannot be ruled out that high margins may have an impact on prices, the high prices must also be viewed in light of the diversity of the Norwegian geography, demography, import duties and agricultural policy.

Although the food value chain is characterised by a strong concentration on all levels, including retailer, wholesaler and supplier, the committee identified a significant change in relative strengths in favour of retail chains. As retailers now also control distribution, purchasing and, increasingly, industrial and primary production, retailers are approaching the other parts of the food value chain with increasing competitive power. These findings are in line with corresponding studies conducted in other countries. The committee therefore suggested that further developments favouring retailers will not necessarily result in a positive improvement for the benefit of the consumers.

On the supply side, the findings identify that there are several market leaders with more than a 50% market share. These findings suggest that a number of products are subject to weak competition, leaving the largest suppliers to determine the terms for the strongest brands.

The committee proposed the following measures in order to balance the findings:

  • legislation to ensure fairness in negotiations and good trade practices, including rules regulating joint marketing, price motivating cost-accounting methods, payment for shelf place and delisting (terms, notification and time limits);
  • an ombudsman for the grocery sector in order to ensure enforcement of the law;
  • a grocery portal in order to increase consumers' ability to obtain a better overview of the grocery selection and conduct price comparisons;
  • better food labelling;
  • amendments under the merger control legislation; and
  • a study on whether to introduce limitations on ownership in the retail sector.

In addition, the committee suggested that the following, among other things, should be subject to further considerations:

  • a separate Franchise Act similar to that in Sweden;
  • the development of cost-reducing distribution systems for small-scale producers; and
  • consideration of the measures that are being discussed at the EU level on unreasonable business practices in order to ensure balanced power and healthy competition.

The report has now been presented to relevant group and bodies for consultation, with comments due by November 2011.

For further information on this topic please contact Heddy Ludvigsen at Advokatfirmaet Hjort DA by telephone (+47 2247 1800), fax (+47 2247 1818) or email ([email protected]).