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Business

A Declaration of War Against Aldi?

Germany's minister for consumer protection says discount supermarkets like Aldi are guilty of price dumping that threatens jobs and German farms. But the industry says its prices are merely competitive.

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The government claims German discount chains are hurting farms and consumers

A leading minister in the German government has said she will launch a campaign against price dumping allegedly being practiced by leading discount supermarket chains like Aldi, Plus and Lidl, which have an enormous impact on German farmers.

Renate Künast of the Green Party, who serves as minister of consumer protection, food and agriculture, said earlier this week she would seek to pass new laws that would ban price wars that lead to price dumping that, ultimately, is harmful to retailers, farmers and consumers alike.

"I can't and won't impose on consumers," Künast told reporters on Wednesday, "but the fact is -- and this is the truth -- that quality and safety have their price." And "when we say we don't want farmers to use antibiotics or growth hormones, that's also going to cost a few cents more," she said. Künast also warned dumping could increase the temptation for farmers to engage in illegal agricultural practices.

Renate Künast

Renate Künast

Künast (photo) has long been a critic of agricultural mass production. As a central tenet of her term, she announced a year ago, she wants to see the market share of organic products increase from the current level of 2.5 percent to 20 percent. But price wars at discounters -- which are accused of cutting prices below the actual cost of production -- are making it more difficult for organic farmers, whose products are more expensive to produce, to compete.

Stricter laws in the works

Chancellor Schröder' government is planning a set of new laws aimed at curbing price dumping practices. The rules would be anchored in a reformed law on unfair competition practices as well as a planned law lifting many restrictions that currently inhibit competition. The Justice Ministry says a draft of the new legislation will be ready by the end of January.

Bauernhof in Allgäu

German farm

The minister is not alone in her campaign against rock-bottom prices. Gerd Sonnleitner, head of the German Farmers Association, also warned against the "magic of cheap," stating that price dumping could lead to cuts in jobs and also harm German farmers. "The first to lose out will be farmers, but grocery stores and consumers will lose out in the end, too."

"Low prices aren't automatically dumping"

Künast's offense against discount chains drew immediate criticism from the German Retailers' Association (HDE) and some quarters in the government's opposition. "Minister Künast is full of hot air," said HDE spokesman Hubertus Pellengahr. "Price dumping is already illegal. And the quality of products sold by discounters is already absolutely fine. Stiftung Warentest confirms this month after month," he said, referring to Germany's equivalent to "Consumer Reports."

Pellengahr also noted that the food scandals that have rocked Europe in recent years were not the product of discount chains. "There is no connection between low prices and BSE or nitrofen," he said.

The Association of German Chambers of Industry and Commerce (DIHK) offered a similar position. "Low prices aren't automatically dumping," DIHK department director August Ortmeyer told the Associated Press. "The current intense competition is related to weak consumer demand -- and that's being reflected in current prices."

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