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Thursday, July 18, 2024

Grocery chain deal could be illegal

The future of the ICA grocery store chain in Norway was uncertain this week after Norway’s competition authority Konkurransetilsynet ordered a temporary suspension of a cooperative agreement between ICA Norge and NorgesGruppen. The regulators fear the deal, announced earlier this year, would give NorgesGruppen too much market control and violate competition laws, even though Swedish-controlled ICA claims it can’t continue to operate in Norway without it.

Prices for products in Norwegian grocery stories would either go up or down, depending on who can be believed in the current grocery chain drama in Norway. PHOTO:
Prices for products in Norwegian grocery stores would either go up or down, depending on who can be believed in the current grocery chain drama in Norway. PHOTO:

“This is a very invasive measure,” Christine Meyer, head of Konkurransetilsynet, told newspaper Aftenposten, referring to her agency’s own order on Tuesday. “This is the first time ever we’ve ordered such a temporary suspension.”

Long-troubled ICA and Norway’s most powerful grocery retailer and wholesaler, NorgesGruppen, announced in January that ICA wanted to turn over portions of its purchasing and distribution operations in Norway to NorgesGruppen. The deal is seen as giving NorgesGruppen more power to control grocery store selection and prices and increase its market share from the 40 percent it already has. It also, however, could help retain ICA’s presence in the Norwegian market.

The parties were ordered to halt their cooperation, which was already underway, until an investigation into its market effects is concluded. Meyer said the regulators believe it could amount to illegal competition. She also fears irreparable damage to market competition should the deal move forward. “To put it simply, you break the eggs. Eggs cannot be fixed,” Meyer said.

No ‘Plan B’
ICA, successful in Sweden and the Baltic countries, has lost market share and millions at both its ICA and Rimi chains in Norway. It has halved its number of shops over the last 10 years but hasn’t wanted to pull out of the Norwegian market.

According to the head of ICA, Thorbjørn Theie, a ban on the deal will mean the end of his business in Norway because ICA has no alternative. “The deal with NorgesGruppen is our only alternative to continue in the Norwegian market,” Theie told newspaper Dagens Næringsliv ((DN).

Theie said he was very surprised by the regulators’ move. “We don’t have a second to lose,” he told Aftenposten. “We have been given a warning until March 8 and will communicate our view with the competition authorities.” ICA has, according to DN, already prepared closure of part of its business, reduced the number of employees and offered severance packages to some.

“We will fight this will everything that we’ve got,” Theie told DN., claiming that the Bunnpris grocery chain had a similar deal with NorgesGruppen until it teamed up with REMA. He can’t see what makes ICA’s deal with NorgesGruppen any different.

Pressure on prices
ICA has said the deal can lower Norway’s notoriously high prices at the grocery store, because NorgesGruppen may be able to negotiate better prices from suppliers, not least Norway’s powerful agricultural cooperatives. Critics claim that would hinge on whether NorgesGruppen would pass on that savings to consumers or keep the profits itself. The family behind NorgesGruppen is known as being among the wealthiest in Norway.

Agricultural interests in Norway welcome the regulatory suspension, fearing an even more powerful NorgesGruppen would force farmers and their cooperatives to lower their own prices. In Norway, it’s common for the agricultural lobby to blame the grocery store owners for Norway’s high prices, while the grocery stores blame the farmers and Norwegian laws and tariffs that protect them.

Both consumer protection council Forbrukerrådet and the state agriculture ministry are among those who have voiced concerns about the ICA-NorgesGruppen deal. The heir to another wealthy family fortune based on grocery retailing chain REMA 1000, Ole Robert Reitan, has also objected to the deal, though, saying it would destroy competition completely, hurt suppliers and consumers.

Reitan was pleased by the news. “It looks like Konkurransetilsynet has done a good job looking past the legalities and relating to the actual results of the deal,” Reitan told Aftenposten. Meanwhile, Reitan wrote on Twitter: “As expected. NorgesGruppen/ICA temporarily stopped. Common sense often prevails.”

Views and News from Norway/Aasa Christine Stoltz

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