1 Sean-Paul Brankin Crowell & Moring May 22, 2008 Buyer power: remedies in different jurisdictions

2 The UK CC Groceries Inquiry (2008) all large grocery retailers have buyer power excessive risk transferred to suppliers likely to lessen incentives to invest Remedies proposed Groceries Supply Code of Practice (GSCOP) builds on existing Supermarkets Code of Practice (SCOP)

3 GSCOP Introduces coverage of all groceries retailers with £ 1 bil+ turnover fair dealing obligation automatic requirement for written record of terms prohibition on retrospective rebates prohibition on shrinkage duty to give notice of and reasons for delisting binding arbitration of disputes Ombudsman sought

4 Austria and Portugal Market investigations find evidence of buyer power Austria – 2007 Portugal – 2006 No specific remedies imposed issues kept under review by both authorities

5 Hungary Trade Act 2005 prohibits abuse of significant market power (SMP) buyers deemed to have SMP where group turnover exceeds HUF 100 billion (about € 4 billion) Examples of abuse include unreasonable restriction of supplier’s access to trade opportunities unfair risk-sharing terms favoring the retailer unreasonable retroactive modification of terms unilateral imposition of listing fees

6 Hungary (cont) First case – Tesco shelf fillers Tesco reduced no of companies responsible for shelf filling from over 40 to 6 concern that suppliers forced to use Tesco or its nominated service providers Tesco gave commitments to review process and charges to suppliers for shelf filling At least six other cases initiated

7 Germany Statutory prohibition on extraction of unjustified benefits extended to all situations of economic dependency (as well as dominance); application to buyer-side issues clarified But extension of law to be repealed from 2013 from then only SMEs will be protected in cases of economic dependency (all undertakings remain protected in case of dominance)

8 France Recently repealed statutory prohibitions abuse of “puissance d’achat” (buyer power) discriminatory terms of supply Other fair trading obligations remain eg, prohibitions on obtaining commercial advantages that are disproportionate or not linked to services rendered obligations that create significant inequality in the rights and obligations of the parties

9 Will GSCOP be effective? Ombudsman important OFT responsible if no Ombudsman SCOP not a success Will it happen? CC currently consulting voluntary scheme seems unlikely legislative alternative limited time in this Parliament other Government priorities

10 OFT attitude? OFT Report on SCOP (Aug 2005) ‘Making [the code of practice] more prescriptive … might well damage the efficient operation of the market’ ‘Good practice by supermarkets around use of written terms will help … We are not proposing a prescriptive, bureaucratic system since we recognise the dynamic nature of supermarket – supplier relations’

11 If no Ombudsman OFT unlikely to be highly active enforcer limited resources/will Other changes will help clearer rules binding arbitration But pro-active enforcement unlikely guidance, education ex officio cases

12 Closing remarks International remedies precedent limited GSCOP potentially a ‘market leader’ Some uncertainty still around its effectiveness