A large supermarket chain decides to reduce shelf space for obesogenic sugary drinks, and Coca-Cola responds by discontinuing supplies. Phenomenal arrogance, perhaps even abuse of dominant position.
Coca-Cola – Intermarché, the blackmail.
Le Figaro
revealed an internal memo from Thierry Cotillard, president of Intermarché Alimentaire. (1) Which explains that the Coca-Cola group has stopped delivering all its ranges to Intermarché and Netto, due to a ‘commercial disagreement‘. Last summer Intermarché reportedly informed soft drink suppliers of its intention to ‘reduce (shelf) space for some soft drinks in favor of products that respond to new, healthier, less sweet trends.’
‘Our customers want healthier products ‘ To preserve one’s long-term health. (…) They also question products that have a negative impact on the environment, increasingly abandoning plastic containers and favoring minimally processed foods from local agricultural industries‘ (Thierry Cotillard, president of Intermarché Alimentaire).
However, Coca-Cola did not digest its major customer’s choice to reduce its shelf ranges, although communicated in good time. The U.S. soft drink giant would like to force Intermarché to hold the entire range of its products. And to pressure the distributor, it appears to have stopped all deliveries to Intermarché and Netto.
Is the Client always right?
The Customer (who pays) is always right in the sense that he is entitled to receive the goods ordered at the agreed prices. The large-scale retail trade (GDO), moreover, is a Customer that can have a relatively significant impact on a food industry’s budget. And so it is that modern distribution, over the decades, has developed business practices that have tended to be unfair to most of its suppliers as more or less weak contractors.
Unfair Trading Practices have therefore been subjected to a special discipline-the EU Directive 2019/633 (UTPs, Unfair Trading Practices)-aimed at rebalancing the contractual relationship in agricultural and food supplies. However, the case at hand is different, as it is the supplier-a Corporation that holds the so-called Must-Have Brands-that exerts a powerful relationship with even the largest retail groups.
Customers of Must-Have Brands suppliers, as a result, are forced to suffer the imposed conditions. With effects on free competition, as such conditions tend to exclude the presence and/or competitiveness of products that come from other suppliers. As seen in the case of Unilever Italy, which in 2017 was sanctioned by the Antitrust Authority for abuse of dominant position.
‘Coca-Cola wants to force us . By all means to maintain a 2020 range that we do not want. This approach actually aims to limit the access to Intermarché and Netto shelves of new products, often manufactured by SMEs, that we wanted to refer to from the January cadence instead of Coca-Cola‘ (Thierry Cotillard, president of Intermarché Alimentaire).
Abuse of dominant position?
‘It is incompatible with the internal market and prohibited, insofar as it may be detrimental to trade between member states, the abuse by one or more undertakings of a dominant position in the internal market or in a substantial part thereof.
Such abusive practices may consist in particular of: (…)
(d) in making the conclusion of contracts conditional on the acceptance by the other contractors of additional services, which, by their nature or according to commercial usage, have no connection with the subject matter of the contracts‘ (TFEU, Article 102).
Abuse of a dominant position-which the Treaty on the Functioning of the European Union prohibits in Articles 101 and 102-occurs whenever a firm in a strong position in a given market exploits that position to eliminate competition. Among abusive practices, the European Commission itself-which has the power to carry out investigations, including on its own initiative, and impose sanctions-explicitly mentions ‘making the sale of one product conditional on the sale of another‘. (2)
Intermarché, standing tall for the sake of consumers
Intermarché-the third largest retail group in France-is one of the leading players in the good food revolution. It has proven this in recent months with two historic decisions that apply on all MDD (Brand Of Distributor) food references:
– reformulation of foods. More than 900 private-label foods underwent recipe review for the specific purpose of improving their nutritional profiles, well expressed on the label through the
Nutri-Score
,
– label of origin. Thanks to Franco-score, consumers can know the amount of French ingredients in each product. So that we can distinguish foods that come from a short supply chain on the fly, and know their region of origin.
To the arrogance of the Star Corporation, the president of Intermarché responds firmly. He also announced possible legal action. Just in the past few days, among other things, we had mentioned Coca-Cola’s deceptive public relations and marketing campaigns aimed at children and their mothers. In short, theAutorité de la concurrence would have several issues to investigate.
‘Until proven otherwise, we are free to choose our own assortments, provided that our suppliers receive adequate notice. We do not accept that a multinational company should hinder our beliefs, infringe on our values of independence, hinder our freedom in terms of choice of assortments, at the risk of setting a precedent with other large groups‘ (Thierry Cotillard).
Dario Dongo
Notes
(1) Salomé Kourdouli. Bientôt une pénurie des produits Coca-Cola chez Intermarché et Netto? Le Figaro, 6.1.20,
(2) See reg. EU 1/2003. See also the European Commission’s website, on the topic’s introductory page ‘
Abuse of dominant position
‘,
(3) On the French good food revolution, see the previous article
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.