German supermarket chains under increasing scrutiny | Business| Economy and finance news from a German perspective | DW | 07.07.2010
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German supermarket chains under increasing scrutiny

Six German supermarket chains combined control 90 percent of the country's market share. With more than 5,000 producers to choose from on the supply side, critics say they gain unfair advantages from the imbalance.

Lidl is a German grocery discounter

Critics worry about worker's compensation, and food quality and variety

The six German supermarket chains which control 90 percent of the country's market share have come under increasing scrutiny lately under allegations they misuse their power to pressure food producers.

To improve conditions for producers, representatives from the Federation of German Food and Drink Industries (BVE) advocate the creation of a federal "Ombudsmann" post. They pled their case Monday in the German parliament before the Committee on Food, Agriculture and Consumer Protection.

With more than 5,000 producers in Germany, many of which have no more than 100 employees, supermarket chains can dictate their terms and conditions, according to the BVE. Producers who complain stand to loose substantial chunks of their business.

Unreported practices

This year supermarkets Edeka, Lidl, Metro and Rewe have found themselves the target of an investigation into the suspected fixing of coffee, pet food and candy prices. The German Federal Cartel Office has since expanded the investigation into beer, spices and baking ingredients, the Handelsblatt newspaper has reported.

According to BVE head Sabine Eichner, illegal practices by supermarket chains is rampant but goes unreported because food producers fear reprisal. She cited an example in which a supermarket chain built a new warehouse and then demanded compensation from producers, saying they would also benefit from the facility.

"We want to defend ourselves against behavior which goes against fair competition.…Such behavior is illegal, and there are valid laws forbidding it, but there is a need for better enforcement. Although the laws are all there, they can't be applied because nobody complains," she told Deutsche Welle.

Eichner said a "fair trade" concept similar to the one taken with third world farmers is necessary in Germany. An ombudsman would enable companies to report grievances anonymously.

"We don't want to limit competition. We're willing to face the competition, which is substantial," she said. "It allows consumers to profit from low prices. However we want to make sure our companies are treated fairly."

A cart full of groceries

Powerful supermarket chains put price pressure on the entire supply chain

Less quality and variety

Marita Wiggerthale, an agriculture expert with Oxfam in Germany, said a side effect of the power imbalance between dominant German supermarket chains and food producers ultimately means consumers are offered products of lesser quality.

"The market isn't growing anymore, but all supermarket chains want to increase their share of it. They can only do so by pushing out competitors, and this competition takes place on the supply side," she told Deutsche Welle.

Pressed financially, producers are more likely to seek cheaper ingredients and less likely to compensate employees fairly.

ja! brand coffee

It's often a mystery where generic-brand food in Germany was produced

According to Wiggerthale, that means investigating the entire sector to gain an oversight into what is actually going on and pinning down exactly how much abuse is taking place in the system, and at what point competition policies need to be reviewed.

"We want to see the situation of the workers improved throughout the entire supply chain, and we demand binding social and ecological minimum standards for all supermarket chains be introduced."

Franz-Josef Mollenberg of the International Union of Food Agriculture, Leisure and Hospitality, described the relationship between supermarket chains and producers as a "complete imbalance." It endangers the quality and diversity of consumer goods, along with jobs at small- and medium-sized businesses, he said.

"This is a concentration process on the retail side which politics have simply let happen. Now we're at a fork in the road if we want people to have access to quality foods," he said.

Author: Gerhard Schneibel
Editor: Mark Mattox

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