Norway: Giant bang for the grocery giants

Groceries. Photo:
Prices in Norwegian grocery stores have in recent years been characterized by very small price differences. Until now, several commentators have argued that this is evidence of fierce price competition in the market. The Norwegian Competition Authority turns this interpretation upside down and believes it is a sign of a lack of competition and a violation of competition rules. Photo:
By Reidar Molthe

18 December 2020 10:56

Norway: Giant bang for the grocery giants

The Norwegian Competition Authority is cracking down hard on the use of “price spies” in the major grocery chains in the Norwegian market and warns of a possible fine of NOK 21 billion to NorgesGruppen, Coop and The Reitan Group combined.

Norwegian players are in shock and are completely incomprehensible to the Norwegian Competition Authority's allegations. Players in Sweden, Denmark, and Finland (also strongly consolidated markets) are following the matter closely.

Many Norwegian analysts believe that the Norwegian Competition Authority is shooting far above target. The agency has known about this type of activity for almost ten years without making any objections.

The chains have three months to submit a response to the Norwegian Competition Authority's report of almost 300 pages. If the Norwegian Competition Authority does not turn around (for lack of evidence or other reasons) many believe that the case will be pending in the judiciary for years to come.

The grocery chains were notified of the huge fee on Tuesday morning. The total turnover in the grocery industry is almost NOK 200 billion, and that forms the basis for the size of the fee.

The practice has been known for years

“We take this type of coordination very seriously and have therefore announced that we are considering imposing a violation fee. The chains have expressed that they have used the information to compete hard. However, the Norwegian Competition Authority's preliminary assessment is that the grocery chains have used the price information to restrict competition. In several cases, they have used the information in such a way that it may have raised prices,” argues competition director Lars Sørgard in a press release.

The fee amounts to almost ten percent of the turnover of the three grocery groups that dominate the market: NorgesGruppen receives the largest fee of NOK 8.8 billion. The Reitan Group receives a fee of more than 7.4 billion and Coop a fee of 4.8 billion.

“Completely absurd”

“This is completely absurd and a historically derailment from a hard-pressed competition director. There has always been full transparency related to the industry norm and the use of ‘price spies’. The practice has promoted competition and contributed to frequent price wars for the benefit of consumers,” Coop CEO Geir Inge Stokke argues.

“With this, the Norwegian Competition Authority says that they have in full certainty let a practice, they now claim contributes to weakened competition, be allowed to continue for a whole decade without either using their guidance duty or intervening,” Stokke continues.

Norgesgruppen categorically rejects that the use of ‘price spies’ is a violation of competition law.

“We believe that ‘price spies’ has led to lower prices and been good for consumers. We will familiarize ourselves thoroughly with the notification and enter a dialogue with the Norwegian Competition Authority,” says communications director Stein Rømmerud, NorgesGruppen.

The Reitan Group argues along the same lines.

In the spring of 2018, the Norwegian Competition Authority raided the three large groups that control Norwegian groceries:

“Our investigation shows that the practice of scanning prices in each other's stores may have led to the chains together pushing prices upwards. Our preliminary assessment is that the collaboration has made it easier for the chains to follow each other in pricing, and given the chains increased incentives to raise prices and weakened incentives to lower prices. The collaboration may have led to Norwegian grocery customers having to pay higher prices in the chains' stores,” says department director Magnus Gabrielsen.

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