“Our intentions are positive, hopefully the result is not as usual …” A comment regarding the act on significant market power

You know, I actually understand the uninitiated viewers. They are kind of exploring. They had to get used to the flags of five countries by the entrance into their favourite stores and once they got used to it, the flags will disappear. Moreover, the Act on Significant Market power is added. By the discussion concerning the amendment, uninitiated viewers must get the impression that all retail chains are callous juggernauts that rob local producers. 

Peculiarity of Czech retail business

So, what is the truth? I have an answer. I do not know, however, whether it will be satisfactory for everyone. In my opinion, it is the closest to truth. Retail chains, parliament and state administration are not responsible for all the confusions and messes. Nor the European Union is responsible even if we got used to blame them for all that bothers us.   

It is the market, or rather the specifics of Czech market, and endeavour of all the interested parties to address all the peculiarities that is responsible for the confusions concerning food. Simple mathematics would tell us that the difference in market share between chains and small sellers is literally dramatic. It is even the difference of several levels. The disproportion naturally implies significant influence of the chains and it can be to the detriment of small food producers.

But I must also add that the behaviour of all large chains towards the suppliers is basically the same. They are led not by “essential” unethical behaviour but the rules of competition.   Competition in the Czech Republic is huge but if a party gives up the means others use, such party places itself into risk of the same fate as Julius Meinl, SPAR or Delvita. Although their position, with regard to small sellers, is unshakable, position on the market is much more unsteady.

Big fight of small sellers

Retail chains enterprising in the Czech Republic are fighting hard to keep themselves on local market. The relations between chains and suppliers are more escalated because the main retail networks in our country have foreign owners. Thus the Czech Republic really differs significantly from many Western European countries where domestic retail companies usually have much more powerful representation. Experience from these countries show that relations between local producers on one side and local retailers on the other side are simply better.

Hard competition can really be fatal for small producers of food. This is the reason why the Act on Significant Market Power is reviewed nowadays and its amendment is being prepared. The opponents claim that the act still contains illogicality, uncertainties and that it would lead to rise of food prices or decrease of Czech goods in stores. To the contrary, the proponents claim that this will not happen and that the food producers will get more fair approach from the chains and will not be forced to produce substandard food.  

Dawning for better quality times

With all the intense exchanges of views, those who will finally decide it, the consumers, were, however, omitted. Until recently we were witnessing that the only argument for Czech consumers was the price. People were willing to consume substandard food full of substitutes and they did not care where food comes from. The point was that food was as cheap as possible. Such period has, however, passed, there are more and more consumers, for whom the quality of food is the essential topic. There is the phenomenon of farmers' markets, there are more customers who buy directly from the producers. In addition to the factor of quality there certainly is national or regional patriotism. Moreover, the phenomenon of Internet sale of food is developing and it starts to transfer from the stage of experimenting into actual business in milliards.

Do we need this law?

So, there is still the question if we really need a law that would order the chains how to behave towards suppliers with the reasoning that otherwise there is the danger of decreasing quality of food products.  It will be no law that will decide on the level of food quality ingredients but solely and only consumers' preference.

This, however, applies the other way round too. Does the sellers' argument that the amendment will rise the prices and bring foreign products onto the market sense? I think that this could happen only to an extent, as consumers allow the sellers to do so. And it seems that they are sensitive to national matters.

“Our intentions were positive”

As you can see it is not easy at all to have an unequivocal opinion on the issue of food legislation in the Czech Republic. My personal opinion is that the Czech market is now really specific, that we temporarily need a legal amendment. But in no case, it is a long-term solution. Permanent solution may accrue only from a bilaterally beneficial agreement between producers and sellers, without any government interventions.

So I believe that the Act on Significant Market Power will get the form that would reflect the needs and interests of producers, sellers and consumers. In order not be witnessing nice statements similar to those that were made after weaknesses of the new law on food appeared. Then somebody said: “Our intentions were positive but the result was as usual.”  I have no doubt that all our intentions are positive. But this time we have to care for positive results.