Sharp rises in food prices are a burden for many people. At the same time, farmers are under high price pressure and many producers complain about unfair trading practices. One important factor behind the problems is the growing concentration in the food sector, particularly in the retail trade. The German Monopolies Commission is currently investigating the effects of this development on consumers and farmers. This was prompted by the farmers’ protests and the debate on inflation in recent years. Where does the process stand today?
For many people, grocery shopping is becoming a burden: food prices have risen by over a third since 2020. The price increase is well above the general inflation rate. Even current price discounts are not changing this because they are too limited.
Market power as a price driver
An important factor for the problems is the growing concentration in the food sector, especially in retail. The four large chains Edeka, Rewe, Aldi and the Schwarz Group (Lidl, Kaufland) control over 85% of the market.
For a long time, the supermarkets’ bargaining power was accepted because it was hoped that this would lead to lower consumer prices. Too little attention was paid to the problems for producers, employees and the environment. Now the negative consequences for consumers are also becoming increasingly apparent. Climate-related crop failures and geopolitical shocks are exacerbating the situation.
According to a study commissioned by the EU Commission, basic foodstuffs are comparatively expensive in Germany and the food retail sector is more concentrated than in France, Poland and Belgium, for example. An analysis by the price comparison app Smhaggle for the Süddeutsche Zeitung came to a similar conclusion for branded foods: these are on average more expensive in Germany than in other European countries such as France and Belgium.
Farmers in a pincer grip
Market concentration is not only limited to retail. A few companies also dominate the market for important agricultural inputs such as seeds, pesticides and agricultural machinery. Global agricultural trade, processing and food production are also highly concentrated in many segments.
This is not only a problem for consumers, but also for farmers. High prices do not necessarily mean a high or rising share for producers. Farmers have little bargaining power vis-à-vis retailers or large processing companies. They have little choice when selling and suffer from price pressure and unfair trading practices. For example, goods are ordered but not purchased in full after the harvest. The farmer protests in 2024 highlighted the difficult situation of agricultural businesses. They were sparked by the abolition of the agricultural diesel subsidy, but there were also protests against the retail trade.
Monopolies Commission starts to act
In response to the protests, the Monopolies Commission is currently investigating food supply chains. It wants to find out how profit margins have developed along the supply chains, who benefits from the developments and how, and what policy responses are appropriate. The Monopolies Commission is an advisory body for competition policy and regulatory issues. It can make recommendations, but has no direct decision-making authority. It publishes its main report every two years. The 2024 report provided initial, preliminary findings on food supply chains. An in-depth special report on food supply chains is planned for September 2025.
The interim results show that there are problematic developments in the food supply chains. According to the findings, supermarket and food industry mark-ups are rising, while farmers’ revenues are falling. Cost reductions are not fully passed on to consumers. In 2022, prices in food processing rose faster than (marginal) costs. There were therefore higher price increases during this period of inflation. The data ends for 2022, but the report was unable to answer how prices have developed since then. However, there was no price reduction in the food retail sector in any period between 2007 and 2022, even if there were price reductions in the upstream market.
Overall, the results are a wake-up call that we need to take a closer look at the power imbalances in the food sector. They make it clear that the problem did not just start with the war in Ukraine and the last wave of inflation, but that it is a longer-term undesirable development.
Our submission
The Monopolies Commission did not want to make any political recommendations based on the preliminary results. This will only happen with the special report. In spring, it sent a detailed list of questions to associations and NGOs in order to obtain assessments and reform proposals from various sides.
At Rebalance Now, we have coordinated a detailed statement with other NGOs and trade unions as part of the Restrict Corporate Power initiative. The statement highlights the unequal bargaining power in supply chains, with retailers having the most power and this pressure being passed on through the supply chain. This is also reflected in the widespread use of unfair trading practices, through which retailers pass on risks and costs to (smaller) food producers and farmers.
The imbalance of power in the supply chain harms consumers, many smaller companies and their employees as well as the farmers. The current market structures promote the externalisation of social and environmental costs: The low revenues in agricultural production lead to poor working conditions or low environmental protection measures. It was important for us to also draw attention to the international dimension and the impact on producers in the Global South.
We also see the risk that digitalisation and the increasing expansion of discounters and supermarkets into food production (verticalisation) will increase the market power of large retailers. Edeka, for example, operates mineral springs, bakeries, meat plants, wineries and produces fruit juices and pasta. The Schwarz Group (Lidl, Kaufland) produces mineral water, soft drinks, chocolate, dried fruit, baked goods, coffee, pasta, ice cream and paper. This development reinforces dependencies on producers and farmers and the orientation of agricultural production towards the dominant food retail oligopoly.
Reforms needed
In view of the high level of concentration, power asymmetries and the widespread unfair trading practices, a comprehensive reform agenda is needed for food chains. In our view, this includes the following measures:
- Mergers in the food sector should be subject to stricter scrutiny. This applies to both horizontal and vertical mergers. Not only should the impact on prices and consumers be considered, but also the impact on negotiating power along the supply chains, on the resilience and security of supply chains, on the systemically relevant supply infrastructure at regional level and on sustainability.
- The Federal Cartel Office should initiate a sector inquiry into the food sector, especially if the preliminary findings from the 2024 main report are confirmed. The sector inquiry should also focus on verticalization and the participations and partnerships of food retailers. Structural remedies such as the spin-off of parts of companies should also be considered, as the fundamental problem is the highly concentrated market.
- We need tighter rules against unfair trading practices. So far, only selected practices have been prohibited, meaning that the rules can be circumvented time and again. This should be prevented by a general clause on the general prohibition of unfair trading practices. There is also a need for lower-threshold complaints mechanisms such as an ombudsperson. A price monitoring body should regularly evaluate the development and composition of selected food prices from production to sale, including profit margins, and derive recommendations for policy action.
We must finally recognise that we have a power problem in the food sector. The high concentration in many areas and especially in supermarkets leads to unequal bargaining power and negative results for society. We need to address this development and apply competition law more strictly. The Monopolies Commission’s special report is an important step in this debate. It is to be hoped that the Commission will have the courage to make clear recommendations in September.
