A new study by Rebalance Now and Misereor shows: A few corporations are increasingly controlling agricultural supply chains. This drives up prices, puts smaller farms in Europe and around the world at a disadvantage and encourages unfair trading practices. This is why the publishers of the study are calling for competition law reforms: large mergers between companies must be subject to stricter scrutiny and rules against unfair trading practices must be updated and consistently implemented. The antitrust authorities must prevent the supply chains from becoming even more entrenched, especially in times of rising costs of living.
The study by Rebalance Now together with Misereor sheds light on the growing market concentration in the food sector. Supply chains are highly concentrated at many levels. This starts with the means of production: Seeds, fertilizers and agricultural machinery come from just a few companies. Large companies also set the tone in the processing of agricultural products, for example in slaughterhouses or dairies. The situation in the retail sector is particularly serious: in Germany, the four large retail chains Edeka, Rewe, Aldi and the Schwarz Group (Lidl, Kaufland) control over 87% of the market.
This means that a small number of corporations determine what ends up in the fields, on supermarket shelves and on our plates. In contrast, farmers and consumers have little bargaining power. They are therefore among the victims of the growing concentration of power.
The concentration is increasing
In recent decades, concentration in the food supply chains has increased further. One important driver is company takeovers, with which companies are expanding their market shares. Migros from Switzerland recently announced its intention to withdraw from the retail sector in Germany. Large parts of the subsidiary tegut are to be sold to Edeka. This will further increase concentration and suppliers will have even fewer customers, which will further weaken their negotiating position. The dominance of a few groups is also increasing among dairies, food manufacturers and grain traders as a result of mergers.
The study looks at several developments that further increase the power imbalances in supply chains:
- Supermarkets and discounters are becoming increasingly involved in food production (vertical integration).
- Digitalization is affecting agriculture and can increase farmers’ dependence on large corporations.
- Increasing geopolitical or climate-related shocks favor excess profits by companies with market power and can subsequently drive further concentration.
Overall, the study assumes that concentration tendencies will continue to increase if authorities do not take countermeasures. This is urgently needed in view of the massive negative consequences of the concentration of power.
Serious effects
The power imbalances lead to higher price premiums for consumers, while revenues in agriculture fall. This was also recently shown in a special report by the Monopolies Commission. Agriculture is suffering from high price pressure and uncertainty. Small producers find it difficult to achieve fair prices and a living income. This applies even more to the Global South. Poor working conditions and unfair trading conditions are widespread. The one-sided political influence of the dominant companies is increasing, as are the ecological follow-up costs.
Competition law: an important instrument with potential for expansion
In order to contain the problems in the supply chains, it is essential to prevent further monopolization and reduce existing concentration. To this end, the study examines the potential of competition law: this is intended to prevent excessive market concentration and the abuse of market power. Competition law and the relevant antitrust authorities are currently not doing this sufficiently. The study criticizes inadequate methods of analysis, lengthy proceedings and high burdens of proof as well as gaps in international enforcement.
Recommendations for a stronger limitation of power
This is why stronger and better enforced competition law is needed. The recommendations include stricter reviews of mergers, stronger rules against unfair trading practices, more structural measures such as splitting up dominant companies and strengthening antitrust authorities. There is a need for reform in Germany and the EU as well as in the global South. Strengthening merger control in Europe and Germany and taking better account of the effects on farmers and small food producers would be an essential step. This requires, among other things, better concepts for bargaining power and vertical effects in supply chains.
Stop tegut takeover by Edeka
In the German context, the Federal Cartel Office must prohibit the planned takeover of over 200 tegut stores by the leading retailer Edeka. Competition in the food retail sector has already been severely weakened. Suppliers are reporting unfair trading practices and one-sided price pressure in contract negotiations. The gap between producer prices and consumer prices is widening. The market shares of the four dominant food retailers Edeka, Rewe, Lidl and Aldi must not be allowed to increase any further.
Authorities and politicians must take more decisive action against growing monopolization. The concentration of economic power in food supply chains is a fundamental problem that deserves more public attention. Only by limiting the power of large corporations can we ensure a fair distribution of value creation and a resilient and sustainable food system.
Download the study in German
- “Marktmacht und ihre Folgen. Kartellrechtliche Reformperspektiven für Agrar-Lieferketten” (pdf; 3.2 MB)
Photo: Matheus Cenali, unsplash
