EU to investigate retailers over dairy pricing
SUPERMARKETS across Europe could face investigations into dairy prices after a report from the European Commission (EC) claimed retailers were failing to pass price cuts back to consumers.
The report found consumer prices have fallen just 2 per cent since the end of 2007 despite a dramatic fall in the price of dairy commodities of between 18 and 49 per cent.
It claims the lack of adjustment in consumer prices has had an adverse effect on dairy farmers, slowing the recovery of the dairy sector.
The report said: “The magnitude, the delay and asymmetry in the downward adjustment of dairy consumer prices - which is particularly marked in some Member States – clearly shows that the EU dairy supply chain does not function efficiently.
“Preventing consumers benefiting from lower prices, constrains the development of demand for dairy products and thus hinders the strength and pace of recovery of the dairy sector.
“This situation also raises serious concerns regarding the distribution of value-added in the chain between farmers, milk processing factories, the dairy industry and retailers.”
The report highlights a lack of transparency in pricing and suggests a Europe-wide system be set up to monitor food prices at producer, processor and retail levels.
Officials at the EU will now carry out an investigation into dairy pricing, and the EC warned there would be tough sanctions if it found the market was not function properly.
It said: “If the Commission finds competition is not functioning, it will not hesitate to act using all its powers under the Treaty.
“National competition authorities have similar powers and must play an equally important role in applying competition law due to the particularities of national markets.”
Part of that work will see the Commission work with the Office of Fair Trading (OFT), which previously carried out investigations into the UK market, fining retailers and processors a total £116 million after finding them guilty of price fixing.
Falling commodity prices
A commodity price surge during the second half of 2007 generated a rapid increase in milk producer prices and a strong increase in consumer prices, peaking in spring 2008
However since the end of 2007, commodity prices have plummeted:
- Butter has dropped by 39 per cent
- SMP has dropped by 49 per cent
- Cheese has dropped by 18 per cent
- Milk has dropped by 31 per cent
In contrast, the EU report concludes consumer prices have dropped by just 2 per cent over the same time frame, pointing to a major discrepancy between producer and consumer prices.