The study identified the existence of direct Territorial supply constraints (TSCs), as well as related practices such as differentiation of products. TSCs are understood as barriers imposed by suppliers in the supply chain that can affect retailers or wholesalers. These may impede or limit the ability of these traders to source goods in other EU countries than the one in which they are based. It can also prevent them from reselling goods to other EU countries than the one in which they are based.
In particular, the study found that for certain fast moving consumer goods (FMCG) categories, half of retailers and wholesalers surveyed reported having encountered refusals to supply, differentiation of product packaging and content, and destination obligations when purchasing from multinational branded goods producers.
Manufacturers explained that such practices were often due to their internal structures. Manufacturers’ national offices often mirror the national structures of retailers and try to respond to needs of consumers in a given country. TSCs seem to be more prevalent in certain circumstances, and for certain types of retailers in a given competition environment.
The quantitative analysis of retail prices showed that the wide range of prices charged across the EU by manufacturers to retailers for the purchase of specific branded products could not be fully explained by the factors which are typically applied to explain price differences, such as different taxation regimes (including VAT), labour costs, raw material costs, production costs, or the price of logistics.
With a degree of uncertainty, the analysis also suggested that if retailers in all the countries with higher purchase prices than the country with the lowest purchase prices could source their supplies from that country, EU consumers could save an estimated €14.1 billion (or 3.5%) on their purchases of a basket of food categories. However, it also remains uncertain to what extent wholesalers and retailers would pass on the benefit of a lower purchase price to consumers. Finally, the predicted rather limited development of cross-border FMCG e-commerce seems not to be able to erode the impact of TSCs.
The study was announced in the 2018 Communication on A European retail sector fit for the 21st century. It examined the prevalence of TSCs across product categories and across EU countries, reasons for them, their impact and the role of digitalisation.
The findings of the study are an important contribution to the dialogue that the Commission will continue with stakeholders and authorities in EU countries to examine the need for further action. A workshop on the topic will be held on 11 December 2020.