Private Labels (Own Brands) in the Grocery Sector: Competition Concerns and Treatment in EU Competition Law

Abstract

The past decade has seen growing antitrust concerns about the impact of private label goods on consumer welfare and competition in the grocery trade. Market investigations of the sector have been launched in several Member States, and there have also been legislative attempts to curb the power of large grocery retailers. Private labels have provoked interest not only because they increase the bargaining power of a retailer, but also because they fundamentally change the relationship between retailers and suppliers from one between trading partners to one between competitors. Because they place the retailer in the double role of a customer and a competitor of its suppliers, private labels are believed to create incentives for the grocery chains to resort to practices, which in turn lead to unfavorable outcomes for the consumers. Some of these practices include: misuse of a branded good’s product information to introduce competing private label products, de-listing of tertiary brands in order to replace them with undifferentiated me-too private labels, and using the strict rules on resale price maintenance to position the private label product in a more favorable position vis-a-vis the brand. Legal scholars and practitioners have been under pressure to find out in what ways competition rules may be used to limit these practices. The goal of this paper is to give a comprehensive overview of the competition law issues that might arise in the context of private labels. The paper is divided into two parts: first, it contextualizes the claims related to the welfare effects of the introduction and continued presence of private labels. It shows that private labels may lead to a reduction in consumer welfare and discusses the practices and conditions that might lead to this negative outcome. The second part of the paper sketches the applicable legal framework under EU competition law as it may apply to the practices mentioned. The paper concludes with a discussion of the challenges for the effective treatment of harm arising from the retailer practices associated with private labels.