Challenges of Competition Policy in Food Value Chains: comments based on Russian experience Food Value Chains and BRICS Competition Law, May Higher School of Economics, Moscow, Svetlana Avdasheva, Applied Economics Department, NRU HSE

Higher School of Economics, Moscow, 2016 Main points to comment… photo o Short reminder of value chain concept o Are distributional issues good or bad in competition policy? o Instruments of competition policy in the food value chain in Russia o Limits of the available instruments of competition policy o Need for more pro-active competition policy

Higher School of Economics, Moscow, 2016 Value Chains and Value Chain Concept to Competition Policy (Short Reminder) photo There are drivers in the value chains Drivers exert governance in the chain Governance implies effects on allocation (efforts to achieve competitiveness) and redistribution (distributions of rents among participants) Interventions in the value chain affect allocation and distribution issues at the same time Is there room for competition policy? What are the best instruments of competition policy? Summing up discussion during the session and experience of Russian competition policy during last ten years

Higher School of Economics, Moscow, 2016 Distributional issues in competition policy photo Strange only at the first glance Contradiction between competition policy and distributional policy disappears if one takes entry consideration into account From the value chain perspectives it is not necessarily bad that ‘PROTECTION OF WEAK PARTY IN THE CONTRACTS’ is slogan for Russian competition policy

Higher School of Economics, Moscow, 2016 Distributional Issues in the Russian Competition Law photo Law ‘On protection of competition’ (2006): special emphasis on exploitative conduct [in fact, most part of antitrust infringement decision is about exploitative conduct; per se prohibition of many types of exploitative conduct] Law ‘On fundamentals of the state regulation of trade in the Russian Federation’ (2009): per se illegality of the exploitation of food suppliers by grocery retail chains Active enforcement, but… limited effects. Why?

Higher School of Economics, Moscow, 2016 Many explanations… photo (1)Legal rules are unable to foresee all the types of exploitative conduct [ Lack of bargaining power is better target for intervention than specific type of exploitation] (2)There is a substitution between different types of exploitative conduct and forms of redistribution of rents within value chain [Slotting allowances may be limited by law, but law cannot control wholesale price] (3)It is unclear if enforcement target is weak or strong party in the contract – and in the value chain [Food suppliers can be weak party.. Including Pepsico, really? Small milk processing factory can be very strong towards small farmers] (4)Enforcement of particular rule (especially per se prohibitions) cannot take into account all effects and distribution along specific value chain [ - prohibition of selective distribution by food suppliers at the first glance enhance competition – but at the same time limits bargaining power in negotiations with groceries and limits incentives of distributors to spend on marketing etc.]

Higher School of Economics, Moscow, 2016 Final remarks photo Protective competition policy is necessarily less effective than pro- active: Pro-active policy can be specific for particular value chain Pro-active policy can take into account both effects on allocation and distribution Pro-active policy can be effect-based, while protective policy tends to use per se provisions Russian experience shows that protective policy is imperfect substitute for pro-active one

20, Myasnitskaya str., Moscow, Russia, Tel.: +7 (495) , Fax: +7 (495)