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Grocery chains under probe

Norway’s three major grocery store conglomerates have long been suspected of playing a major role in keeping food prices high. Competition authorities finally decided to pay them an unexpected visit last month, when they seized large amounts of data and now are looking for signs of illegal price-setting.

The price of a basket of grocery items in Norway remains higher than in most other countries. Competition authorities have launched a new effort to probe possible illegal price-setting. PHOTO: Landbruks- og matdepartementet

The raids, reported by newspaper Aftenposten, were conducted just as new debate swirled over food prices in Norway. The prices for meat, dairy products, many vegetables and other food can be nearly twice what they are even in neighbouring Sweden, which also is known for high taxes and protectionistic agricultural policy. The raids also came just before the state launched into its latest round of negotiations over Norwegian farmers’ demands for direct subsidy and tariff protection from cheaper imports.

While the farmers have long received both subsidy and state support that lead to higher prices for everything from milk to their tomatoes and celery, they can’t understand either why lower market prices for their lamb don’t result in lower prices for consumers at the grocery store. Norway’s agricultural policy is enormously complicated, but when a farmer raising sheep and lamb gets several hundred kroner less per animal and the price of a lamb roast at the store remains high at more than NOK 400 per kilo, someone is profiting on the difference.

The families behind Norway’s major grocery store retailers and wholesalers also often appear on the annual lists of the country’s wealthiest individuals. New chains can have a hard time setting up shop, while industry giant ICA ended up pulling out of Norway because it couldn’t compete against the three other chains that dominate the market. Lidl gave up long ago.

Coop, REMA 1000, and NorgesGruppen under probe
It’s all led to nagging questions over the years that seem to have prompted the competiton authorities at Konkurransetilsynet to seek some answers. They raided headquarters for REMA 1000 and Coop along with the largest of the three, NorgesGruppen, which runs both wholesale and production operations and chains including Meny, Jacob’s, Joker, Spar and the supposedly low-priced KIWI stores.

“We can confirm that we made unannounced controls at several companies,” Magnus Gabrielsen, a division director at Konkurransetilsynet, told Aftenposten after the raids in mid-April. “The goal is to try to confirm or reject suspicions of possible violations of the competition law’s ban against cooperation that would limit competition.” Consumers may wonder, for example, why a dozen eggs from different egg producers cost exactly the same at both a REMA 1000 store and a competing KIWI store: NOK 39.90 (USD 5).

“To be more concrete: The suspicions involve exchange of strategic marketing information, including price, among the chains in the grocery store market,” Gabrielsen added.

High concentration
He noted how the grocery business in Norway is highly concentrated. “There are few grocery chains, and in such markets, exchange of information can hinder competition and hurt consumers,” Gabrielsen said. The concentration is a result of retailers that also act as wholesalers, the fact that there are only three main players in the entire country, compounded by the existence of one major food producer, Orkla, that also can wield lots of power regarding the prices it charges the retailers and even what kind of shelf space and placement Orkla’s products (which include the ever-popular frozen Pizza Grandiosa brand) get in the stores themselves.

Gabrielsen wouldn’t elaborate on the authorities’ methods or findings so far, but the raids clearly were driven by concerns that both Orkla and the grocery retailers have a history of profits that may have come at the expense of consumers. While tariff protection can play a major role in why Norwegian tomatoes, cheese or milk is more expensive than in Sweden, it doesn’t explain why a liter of Ocean Spray Cranberry Juice (produced in Poland for the Nordic market) costs as much as NOK 54 in the few Norwegian grocery stores where it’s found, compared to just SEK 18.90 in Swedish grocery stores, including VAT, even when the Swedish krone is weaker than Norway’s. One thing is clear: Those who like cranberry juice are wise to stock up when they’re in Sweden.

Eager to appear cooperative
Aftenposten reported that the grocery chains targeted in the raids indicated they intend to cooperate with the authorities. All three confirmed the “unannounced controls” at their offices that occurred a few weeks after a court approved them in late March.

“We confirm that we had a visit by Konkurransetilsynet and we have received them well, and found the information they requested,” Bjørn Takle Friis, communications director at Coop, told Aftenposten. He claimed Coop “competes hard every day and has nothing to hide.”

Nor does NorgesGruppen, according to its communications director Per Roskifte, despite the earlier secretiveness of the Johannson family that controls the company. He claimed NorgesGruppen “strictly” follows Norwegian competition law and that it would “cooperate fully” with the authorities and clarify any questions they may have. Beyond that, the company had no further comment.

“We can confirm that Konkurransetilsynet has visited us,” said Mette Fossum, communications director for REMA 1000. “We have a good dialog with the authorities and are of course giving them all the information they want.”

Political problem
Norwegian politicians have struggled for years to clarify why food prices in Norway remain among the highest in Europe, if not the world. Proposals flew earlier this year to prevent major wholesalers from selling the same item at different prices to various retailers, depending on volume.

There’s also been great concern over so-called “price spies,” people hired by the chains to check on and report in prices for specific items on sale at stores in competing chains. Law professor Erling Hjelmeng suspects that’s what set off the raids, if the chains struck an agreement amongst themselves over how  the spies functioned. Such price-checking is also hard to control.

Still others complain that food prices are high in Norway because there are many small stores scattered around urban areas, instead of bigger “supermarkets” that could offer more economy of scale. Newspaper Dagens Næringsliv (DN) reported recently that the three major grocery retailers have opened 546 more “low-price” and small stores, while there are 167 fewer supermarkets. That’s also fueled complaints over poor selection at the average Norwegian grocery store: A recent survey conducted by Nielsen showed that only half of Norwegian grocery shoppers are satisfied with the selection in grocery stores, another reason why thousands of Norwegians routinely drive over the border to shop in Sweden. Berglund



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