EuroCommerce and Independent Retail Europe, two of the main associations representing the retail and wholesale trade in Europe, have sent a letter to the European Commission calling for a legislative solution to eliminate Territorial Supply Constraints (TSC). The two organisations also urged the European Commission to announce such an initiative in the next Single Market Strategy.
In the letter, the associations denounce that most consumer goods - those most appreciated and recognized by European citizens - are controlled by a small number of large manufacturing companies. These companies, while benefiting from the economies of scale and efficiency offered by the Single Market, tend to centralize production in a few plants strategically located in the EU, taking advantage of the free movement of goods to optimize costs.
However, according to EuroCommerce and Independent Retail Europe, producers themselves voluntarily fragment the market at the distribution stage by imposing territorial constraints on retailers and wholesalers. These constraints manifest themselves in various forms: differentiation of packaging and labels, refusal to supply, arbitrary price differentiations or restrictions on cross-border sales.
These practices, the letter states, hinder free competition and prevent distributors and consumers from fully benefiting from the European Single Market.
A billion-dollar cost to consumers
Already in 2020, a Commission study had quantified the cost of these practices for European consumers at at least 14 billion euros per year, considering only four categories of food products. With the increase in food inflation recorded by Eurostat in recent years, the current figure could be close to 19 billion euros.
EuroCommerce and Independent Retail Europe said they welcomed the Commission’s actions so far against AB InBev and Mondelēz, two emblematic cases of territorial restrictions. However, they stressed that European competition law is not sufficient to effectively address the phenomenon, as it only applies to companies in a dominant position.
Hence the request for targeted legislative intervention, capable of guaranteeing fair access to products throughout the Union, for the benefit of competition, small distributors and above all consumers.
