Food manufacturers have appealed to the Federal Antimonopoly Service (FAS) to review the actions of retail chains for compliance with antitrust laws.
Food manufacturers are extremely dissatisfied with the terms they have encountered in contracts with retailers.
According to suppliers, such terms are extremely favorable to retailers and extremely disadvantageous to themselves, and therefore should be revised.
First and foremost, suppliers are dissatisfied with the chains’ demands to guarantee them a certain level of profitability.
According to market participants, this refers to the difference between the purchase price and the retail price. For some product categories, such as groceries, this figure can reach 43%.
Furthermore, if the actual profitability is lower than stipulated in the contract, the supplier is obligated to compensate for the difference at its own expense. This may include fines, discounts, or other payments.
Failure to guarantee a retailer’s profitability means the manufacturer risks a reduction in the product range purchased by the grocery chain, or even unilateral contract termination at the retailer’s initiative.
Food suppliers are particularly dissatisfied with the fact that they are effectively unable to influence the price of a product on the store shelf once it has arrived.
Price depends on many factors: the popularity of the product among consumers, market conditions, and the prices of competing companies.
As a result, the retailer is able to set prices below the market average, thereby increasing demand, while compensating for the missing margins through the supplier. Thus, the retailer always reaps the maximum benefit, while the manufacturer, on the contrary, faces extreme risks.
At the same time, according to current legislation, the total remuneration paid by the supplier to the retail chain must not exceed 5% of the purchase price of the goods.
However, as experts note, new compensation mechanisms may not fall under this restriction, creating legal uncertainty.
As a result, suppliers see appealing to the FAS as one of the few ways to resolve the current problem.
At the end of January, the antimonopoly service already sent inquiries to 11 major retailers, requesting information on purchase and retail prices, as well as sales volumes of certain food products for the period from September to January.
Experts note that the outcome of this case could impact established practices of interaction between suppliers and retailers and determine the fundamental principles of the rules of the game that will govern long-term interactions in the future.
