Various people have expressed doubts about the Competition Authority's ban last year on meat processing companies pre-labelling meat products for shops. In the Viðskiptablaðið last week, Óðinn wondered about this „very strange ban“ and expressed doubts about the Competition Authority's assessment of interests and its prioritisation. Óðinn suggested that the ban on supplier pre-labelling had led to a greater increase in the price of meat products for consumers than for other consumer goods.The consequences of the collusion were, among other things, that competition for retail prices on meat products labelled by meat processing companies was very limited in many product categories. This situation has completely changed since the ban on pre-packaged labelling for the aforementioned products came into effect. A news article on the ASÍ website from 3 May reports that the price difference between shops for meat products has increased significantly since the changes came into effect. This refers to a new survey by ASÍ which revealed a 10-30% price difference between shops on meat products that were previously pre-labelled. Shortly after the changes, in May 2011, this difference was 6-20% according to a survey conducted at the time. In ASÍ's view, this comparison confirms that competition in the sale of these food products has increased with the introduction of the changes.
Greater competition should, as a rule, lead to lower prices than would otherwise have been the case. The Competition Authority has sought to assess its effect on prices since the pre-labelling of meat products was discontinued. To this end, the authority examined price data from December 2011. It emerged that the price increase for meat and meat products was around 131% at retail, according to Statistics Iceland's index measurement in 2011. Of this, the price increase for fresh and frozen meat is even higher, at around 15-25%. Interestingly, the price increase for more processed meat products from these categories (e.g. sliced, smoked and packaged meats, etc.) was only around 6% on average. The latter category consists almost exclusively of products that were previously pre-labelled by suppliers, although both fresh and frozen meat had previously been labelled by producers to some extent.
The information obtained on the increase in the price of produce for farmers and the increase in the price from meat processing companies to retailers indicated that this increase was around 15-25% in 2011. It therefore appeared to be a greater price increase than the average in retail, as detailed above. From this, it can be seen that there is strong evidence to suggest that the ban on retail pre-labelling increased competition in the retail sale of meat products, and that the price increase was not as great as it would have been if a fixed retail mark-up had been added to the slaughterhouses' wholesale prices, as was previously the case.
In the last issue of Viðskiptablaðið, Óðinn rightly points out that „agricultural produce without vegetables“ (which are largely meat products) rose sharply in the first half of 2011, or around the time that most meat suppliers stopped pre-labelling meat products. Since mid-2011, however, the price trend for these products has been similar to that of other consumer goods, as Óðinn's chart shows.
In the opinion of the Competition Authority, the figures from Óðinn do not lead to the conclusion that a ban on advance pricing by meat processing plants has led to higher prices; rather, other influencing factors, e.g. a general increase in food prices and an increase in the price paid to farmers, played a part. On the contrary, it can be concluded that the increase would have been greater had the ban on meat suppliers pre-labelling meat products for retail stores not been introduced, as price increases from producers and meat processing companies would then have been passed directly on to the retail price..
The Competition Authority has called on the relevant interest groups and government authorities to ensure that the changes benefit consumers. It is clear that various shops have not been as good at price labelling as would have been desirable. However, the Consumer Authority has promoted improved price labelling through changes to the relevant regulations. As is well known, the Consumer Authority carries out statutory supervision of price labelling in shops.
Although concerns have been raised about how it has been implemented, no one who has looked into the matter can claim that it would be better for consumers to revert to the previous situation. The Competition Authority points interested parties to the information on its website.
Everyone should therefore be able to agree on the importance of removing the obstacles to unlawful collusion that places consumers in a hopeless position, similar to the one revealed in this case. At the very least, the Competition Authority will continue to prioritise the removal of such obstacles.
Steingrímur Ægisson
Director at the Competition Authority
[This article was published as an article in the Viðskiptablaðið on 24 May 2012.]
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