A purchasing and distribution agreement struck between supermarket chain ICA and Norway’s largest retail business, grocery wholesaler and store owner NorgesGruppen, is anti-competitive and unlawful, ruled Norway’s Competition Authority on Thursday. The long-awaited decision from the Authority, which told both companies that their deal must be scrapped, also effectively blocks a retaliatory move by two other rival grocery chains, Coop and Rema 1000, to form a partnership to secure their own positions in the market.
The Authority said the deal would weaken competition in the Norwegian grocery market, reported state broadcaster NRK. “We have assessed the agreement and believe ICA and NorgesGruppen hold so much power together that it is detrimental to consumers in the grocery market,” said director general Christine Meyer. “That’s either because you get higher prices in the long term, or a worse deal.”
ICA planned, under the terms of its deal with NorgesGruppen, to permanently close down its warehouses in Narvik, Bryne, Bergen, Trondheim and Arendal in a cost-cutting move, leaving the bulk of its procurement and distribution to NorgesGruppen. ICA was to continue buying in its own brand products, fresh bread and bakery goods, and fresh seafood.
If the Competition Authority had approved the deal, Coop and Rema 1000 threatened to forge their own procurement agreement. “This is not blackmail, but a reality,” said Ole Robert Reitan, whose family company owns Rema 1000. “We have no other weapons available to secure our own stores.”
Meyer said the Authority had considered whether Coop and Rema 1000’s proposal affected their handling of the case. “We have decided it doesn’t change our conclusion that the agreement between ICA and NorgesGruppen is illegal,” she said. The Coop/Rema 1000 agreement was to be suspended if the Authority rejected the first partnership.
“This is a large and important case for both the industry and the company, but we will go through the Authority’s reasons,” NorgesGruppen director Per Roskifte told NRK. “We will also look at what alternative measures we can take forward. It is, however, too early to say anything about that.” Both ICA and NorgesGruppen have until April 25 to respond to the Authority’s decision.
ICA, which also runs Rimi grocery stores, has said it would probably pull out of the Norwegian market if the deal was struck down, since it has struggled for years against its bigger local rivals. That would leave Norway with one less grocery store player regardless, likely bolstering NorgesGruppen’s grip on the market through its Kiwi, Meny, Joker, Centra and Ultra chains, among others.
Parliament feared monopoly
Politicians widely welcomed the Authority’s decision, saying the two agreements would reduce selection and raise prices for customers. “It amounts to almost an absence of competition,” said the Progress Party’s (Fremskrittspartiet, Frp) Øyvind Korsberg. “It would be a monopoly with two giants sharing the market between them.”
“This represents a competition situation in the grocery industry that we cannot live with,” said Knut Storberget, Labour’s (Arbeiderpartiet, Ap) food and agriculture spokesman. The Centre Party’s (Senterpartiet, Sp) Trygve Slagsvold Vedum said it was unwise to be left with two large players in the industry. “It is dangerous for consumers, the food industry and agriculture,” he said. His party’s main constituency of farmers agreed, with the organizations representing them hailing the Authority’s rejection.
“It paints a picture where it’s only a few who have power over the most important thing we have, namely our food,” said Karin Andersen from the Socialist Left (Sosialistisk Venstreparti, SV). “Here, too much power would be gathered in too few hands.”