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Food retailers under fire for response to unfair trading practices

November 24, 2020 1:18 PM, Der AUDITOR
Food retailers Aldi, Lidl and Edeka and Rewe hold an 85% market share in Germany.
Food retailers Aldi, Lidl and Edeka and Rewe hold an 85% market share in Germany.
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BERLIN. Food retailers Aldi, Lidl and co. have come under fire for voicing their opposition to Chancellor Angela Merkel over Germany’s newly proposed legislation on unfair trading practices. In an open letter addressed to the four largest food retail groups that hold an 85% market share the German Farmers’ Association vividly highlights and condemns the markets hypocritical stance.

 

Aldi, Lidl and co. under fire

On Wednesday, the German Farmers’ Association issued an open letter addressed to the large four food retail groups Aldi, Edeka and Lidl and Rewe that hold an 85% market share in Germany and are frequently criticised for abusing their dominant position in dealing with suppliers. The letter heavily criticises the big four’s hypocritical response to the government’s recently approved legislation on unfair trading practices on 18 November.

Signed by President Joachim Rukwied and his colleagues from the regional associations the letter juxtaposes the retailers outrage at the government’s legislation to improve the position of small and medium-sized suppliers in dealing with a largely concentrated industry with the experiences of the farmers and their families, “which have been under massive economic pressure for a long time.” The letter further states that the retailers’ practices have fostered “a pronounced low price culture, lack of esteem for food and the end for many companies.” Many businesses have lost “their ability to work,” have had, "their existence and sustainability destroyed” and “remain at risk.” These practices strongly oppose the retail groups' marketing campaigns, which create the illusion that they are close to farmers and very much concerned over sustainability and fair trading practices.

Legislation sparks controversy

The new legislation adopted by the German government is in line with EU regulation 2019/633 on unfair trading practices in the food chain adopted in 2019. This regulation bans certain unfair trading practices and gives member states time to implement legislation until May 2021. The legislation proposed by Julia Klöckner Germany’s, Minster of Agriculture, extends EU legislation in banning more unfair trading practices. Suppliers will, for instance, no longer be made to pay if a trader cannot sell the products ordered. If traders, in addition, send back unsold products they will still be asked to pay the full price.

The proposal has received government approval, but will no doubt be controversially discussed in parliament. Especially since concerns have been voiced that legislation does not go far enough in protecting medium-sized businesses since it is limited to businesses with annual turnovers ranging below EUR 350 million. The food retail giants are, in addition, hailed as being highly creative in adjusting to new market conditions meaning that the proposed measures may prove ineffective in limiting the power they yield over suppliers.

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