The Italian Competition Authority is investigating distribution in the food and agricultural goods sectors. It initiated a survey of the distribution in these sectors at its meeting on 1 June 2005.
The Authority will receive comments from companies active in these sectors as well as conducting its own investigations. It is concerned by the repeated increases in consumer prices for many food products over the last few years. It is understood that the competition Authority will analyse the different organisational approaches used in Italy for the distribution of foodstuffs, in order to identify inefficiencies in the organisation of this sector, or the presence of any conditions calculated to weaken competitive pressures among operators at the different phases of distribution.
In particular, the Authority will investigate operators in modern distribution channels (operating through chains of large-scale outlets offering a wide range of goods and services and, in their dealings with producers, directly handling practically all the activities needed to make the finished product available to the end-user), as well as those in traditional retailing (relying on very small and widely dispersed stores, and dealing with producers only indirectly, through intermediaries acting as wholesale distributors).
The Authority is also expected to look at the dynamics of competition in retail distribution, which is subject to extensive regulation deriving from regional laws and regulations, as well as administrative rules stipulated by local authorities.
A first concrete step is the opinion that the Authority issued with respect to the draft Legislative Decree No 182/2005 providing that large-scale outlets and supermarkets should allocate at least 20% of the area dedicated for the sale of agri-food products to regional agri-food products. The draft decree provides that the authorisation to setting up new large-scale outlets or restructuring existing ones shall be subject to the compliance with such obligation.
The Authority in the opinion sent to the Parliament and the Government requested the deletion from the draft Decree of the mandatory allocation, in large-scale outlets and shopping malls, of at least 20% of their Foods areas for the sale of agro-food products to regional agro-food products.
According to the Authority such provision would significantly hamper the competitive dynamics in the market of distribution of agro-foods products as well as in the market of the production of such goods.
In particular, the draft provision would reduce the possibilities that distributors have in choosing the optimal allocation of spaces, ultimately resulting in higher products’ prices and lower range of products offered.
On the other hand, the producers of regional products would have less incentives to improve the quality of such products and to reduce production costs, to the extent that the provision under issue grants them the space in the outlets. Moreover, the Authority considers that such provision would constitute an unjustified discrimination against other producers, both Italian and foreigners, which may have achieved more efficient level of production and higher quality standards.
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