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Reviving competition in the retail sector

It is the concentrated nature of the retail sector, notably at a local level, which explains the limited impact of reforms introduced in recent years by the authorities (particularly the Galland law) in order to revive competition in the retail sector.

Supermarket. © INRA, MAITRE Christophe
Updated on 08/29/2013
Published on 08/29/2013

The food retail sector in France has changed radically during the past twenty years.  Its organisation and concentration have contributed to enhancing the purchasing power of major retail groups.  85% of sales outlets covering 200m2 to 1200m2, often erroneously defined as “small traders” as opposed to major retailers, are also affiliated or belong to major retail groups.  The market share of the six largest purchasing centres has grown consistently and now reaches more than 70%.    The situation is similar in Germany.

During this period, the major retail sector has been the subject of numerous laws in France designed to provide a framework for its development (Royer and Raffarin laws) and to protect its smaller competitors and its suppliers (Galland law).  The inflationary effects of these laws were condemned and a wave of further reforms then followed (Dutreil in 2005, Chatel in 2008, LME 2009) in an attempt to correct the situation, without meeting with complete success.

The researchers analysed the different laws focused on banning loss leader selling which can allow suppliers to impose a floor on the prices used by retailers (Galland law).  They showed that these laws, in the same way as retail price fixing, remove any competition between retailers, and also hamper competition upstream.  Therefore, the fixing of a floor price, resulting from the ban on loss leader selling, will always have a negative impact on social well-being.

Although the Galland law was reformed thanks to the Chatel law in 2008, the concentration of the market resulting from the Royer and Raffarin laws could explain the limited impact of these reforms.

Although the concentration of retailing at a national level is high – but not worrying when compared with some of our European neighbours – the situations are markedly contrasted at a local level.  Several recent studies have testified to the very high concentration of retailers in a large number of catchment areas, notably in Paris. It is therefore essential to restore true competition at a local level.

Scientific contact(s):

Associated Division(s):
Social Sciences, Agriculture and Food, Rural Development and Environment.
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