Post on 06-Apr-2018
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Private Labels & Brand
CompetitionDr Ariel Ezrachi,
The University of Oxford Centre for Competition Law and Policy
16 January 2009, CCP UEA
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Agenda
Developments of Private Labels
Competitive Effects
Competition Law Enforcement
EC Competition Law
Article 82 EC
Enforcement Choices
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Development of Private Labels
Value versions in the UK since the1920s
An increase in volume and range in the 1960s
Today, around 50 per cent of sales in major UKsupermarkets are private labels.
Influencing variables:
Growth of retailers (national and international
level); Increased market concentration;
Move from local stores to supermarkets;
Economic downturn.
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Competitive Effects
Starting point lower prices, greater choice,innovation and competitive pressure.
Short term vis-a-vis long term effects.
1. Lower Costs
Short term loss.
Economies of scale.
Reputation umbrella.
Lower risks, innovation follower.
High profit margins.
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2. Lower Prices
Range from value to premium products.
Competitive pressure on brands producers.
Note the retailers control over pricing, the possible
use of artificial price differentials and value
destroying promotions.
40 per cent of consumers who purchase privatelabels, do so due to the lower prices of goods. 30
per cent see these labels as being a better valuethan brand equivalent.
UK Competition Commission Grocery Market Inquiry, Working paper on the
competitive effects of own label goods para 8(Final Report published 30.04.08)
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3. Restricts Brand Power
Restricts the market power of dominant brands or amulti-product brands.
Facilitates entry which otherwise will not bepossible.
Lower prices, better quality, more innovation.
4. Innovation
(+) Pressure on brands.
(+) Private label innovation.
(-) Innovation follower.
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5. Choice
Wider choice?
Profit margins and delisting.
The elimination of slow selling brands.
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6. Foreclosure and Access toShelf Control over distribution channel
Preference for private label.
Must stock brands and slower selling brands.
The effects of one stop shop culture Switching
costs between outlets increases retailers market
power.
A loss of 20% of sales for the manufacturerinvolves a serious risk of bankruptcy (UK Supermarketsreport (2000))
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7. Market Transparency
Brand recognition.
Private labels.
8. Free Riding Innovation follower.
Access to information.
Copycat packaging
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9. Marketing and Advertising
Reliability umbrella
Internal references to private labels
Control over in store marketing.
Only 1/3 of grocery store purchases are planned inadvance.
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Competition Law Enforcement
Short and long term effects.
Long term stability of private labels share?
Self policing?
Speculative nature of long term effects.
Is intervention justified?
Can traditional analysis reflect the combinedhorizontal/ vertical effects and the rise in marketpower?
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EC Competition Law
ECMR
Increased concentration.
Spiral effect and increased consolidation.
Buyer power.
Article 81 EC
Buying alliances.
Agreements etc.
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EC Competition Law
Article 82 EC
-Dominance
Case by case market definition.
Market power below the threshold of dominance(asymmetry of information, in-store competition, control of shelfspace, foreclosure, dependency ...)
-Collective dominance
-Cumulative effects as alternative?
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EC Competition Law
Goals
Achieve lower prices, better quality and a widerchoice of new or improved goods and services.Guidance on the Commission's Enforcement Priorities in Applying Article 82 EC
Abuse ?
Short term and long term effects.
Self policing.
Market constraints - Asda Essentials
Establish competitive harm.
Protecting competition or competitors?
Abuse of a non-dominant position?
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Enforcement
Internal analysis - If it aint broken, dont fix it
External analysis - a new market reality?
-Robert L. Steiner: Vertical competition exists
-Rob Walton, Wal-Mart Chairman: The manufacturers
price is something thats determined largely by negotiatingpower of retailers that carry his merchandise, ie byvertical upstream competition.