**Vienna**: The Fairness Office reports over 800 complaints from farmers against major retailers amid rising pressures and unfair practices in the supermarket sector, highlighting issues with exclusive contracts and pricing pressures as the government seeks to implement stronger regulatory measures.
Supermarket pricing practices in Austria have come under scrutiny as a growing number of farmers and food producers report unfair treatment by major retailers. The Fairness Office, established three years ago to monitor these practices, has seen a significant increase in complaints, recording over 800 instances where the threshold of fairness has allegedly been crossed in dealings between supermarkets and their suppliers. The number of reports has surged from 21 in its first year to more than double that, with the latest figures showing a tripling of direct and indirect complaints.
As detailed in a recent report by the Fairness Office, the rising costs of personnel and energy for meat processing companies have led to calls for higher prices; however, these requests are frequently ignored by retail chains. The supermarket sector appears to exert substantial pressure on suppliers, compelling them to engage specific logistics and payment service providers, whose costs remain opaque and disproportionately high.
The agricultural landscape in Austria is dominated by a handful of supermarkets, with Agriculture Minister Norbert Totschnig noting that three chains control approximately 90 per cent of the food market. This concentration results in an environment characterised by tough price negotiations, threats of delisting, and unilateral changes to contracts, which create a challenging atmosphere for producers who lack alternative routes to market. “Many producers fear losing their shelf space and feel compelled to accept unfair conditions because they lack alternatives,” Totschnig highlighted.
The report from the Fairness Office emphasizes the detrimental impact of exclusive supply contracts, particularly on start-ups and young entrepreneurs, who find themselves in precarious dependence on a single retail partner. These producers are compelled to invest significantly to secure shelf space in supermarkets while being subjected to fluctuating order quantities, all without any guarantee of purchase from their larger partners. Failure to meet order specifications may lead to substantial penalties.
Moreover, the supermarket giants’ in-house brands are reported to contribute to friction within the industry, as retailers engage in vertical integration, controlling more stages of commodity production while often keeping prices for generic products artificially low. This practice distorts competition and negatively affects the market standing of established brand suppliers, according to the Fairness Office.
While the Fairness Office offers anonymous advice and mediation, concerns regarding its capacity to effect substantial change persist. Critics point out that the office has primarily dealt with the symptoms of these issues rather than addressing them directly. Calls for stronger sanctions and fines have been placed on lawmakers, as the authority to impose these penalties lies with the Federal Competition Authority and the Cartel Court, which are currently investigating various allegations of market power misuse within the food retail sector.
An ongoing case involves the supermarket chain MPreis, while another is being examined by the European Court of Justice. The Federal Competition Authority has indicated that it is receiving a growing number of complaints related to the unilateral modification of supply agreements, emphasising a national sentiment that weakens producers’ standing in negotiations.
Michael Böheim, a competition expert at Wifo, describes the initiative under the Fairness Office as sensible but lacking a deterrent impact. He highlights the challenge of high cartel fines, which are frequently passed along to consumers in the form of higher product prices. Böheim argues that a cultural change is warranted within retail practices to ensure that producers are not stifled, as this has broader implications for market competitiveness and consumer pricing.
As the discussions continue, Agriculture Minister Totschnig has announced intentions to engage in dialogue with retail chains. Additionally, at the European level, new measures against unfair trading practices are anticipated. The European agriculture commissioner Christophe Hansen has committed to a comprehensive review of an EU directive addressing these issues by the end of the year. This evolving scenario underscores the complex interplay between retail practices and the sustainability of the agricultural sector in Austria.
Source: Noah Wire Services
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