Wednesday, March 12, 2008

Could it happen here?

There seems to be a quickening pace of regulation on issues relating to trade promotion, with most (though not all) the activity taking place outside the US. The question for us Yanks is what, if anything, it means domestically, and what the foreign developments mean to our international operations.

I’ve mentioned in the past the international investigations of Intel regarding pricing and rebate (e.g., Intel Inside) issues. Investigations are ongoing in Japan and Korea, and recently there have been raids on several European retailers and on Intel offices, in connection with the EU’s investigation. In the US, AMD is suing Intel as a private action under the Robinson-Patman Act. In addition, last month the state Attorney General in New York served a subpoena for a state investigation.

But that’s (mostly) old stuff. What is new is a government study of retail concentration and excessive retailer power in the grocery industry in the UK, and calls for a similar study in the EU.

In the UK, the Competition Commission, similar to the FTC in the US, has been investigating retail concentration for the past couple years and has released its preliminary findings.

Suppliers are to get more protection in their dealings with big supermarkets in a bid to ensure fair competition.

An ombudsman will be appointed to resolve disputes between retailers and their food suppliers, the Competition Commission recommends. [ … ]

The commission also said it was concerned about retailers being able to transfer unexpected costs to their suppliers.

Shortly after the report was released, there were calls in Brussels for a similar study on the continent:

In the wake of the Competition Commission's remedies report on the UK market, 439 MEPs have signed a written declaration on investigating the power exerted by large supermarkets in Europe.

The declaration calls for the European Commission to look into “the impacts that concentration of the EU supermarket sector is having on small businesses, suppliers, workers and consumers and, in particular, to assess any abuses of buying power which may follow from such concentration”.

So, the question arises: Is there likely to be anything similar happening in the US? Six months or a year ago, I would have said absolutely not (in fact, I think I did say so in my book). Now I’ll still say “absolutely not” in the short term, but modify it slightly to “probably not, but maybe” in the medium- to longer-term.

The reason for the change is only partially the international tide toward greater scrutiny of trade channel practices. There is also a populist tide running in American politics, and Robinson-Patman is nothing if not populist legislation. In addition, local politicians have found that there are points to be scored by bashing the big boxes (especially Wal-Mart).

There was once a belief that R-P was more vigorously enforced in Democratic administrations than by Republicans. Recent decades have offered little support for that idea – the FTC under Carter and Clinton showed only marginally greater enthusiasm for R-P than the Republicans who preceded and followed them – but the way the leading Democrats have talked in debates might lead one to believe that they would favor at least some increase in enforcement activity. Or that could just be campaign talk.

Even if a new president wished to push the FTC toward a more activist role, it would take some time, since only one commissioner can be replaced each year, and a balance must be maintained between the parties in making appointments.

As a related item, the FTC chair has just resigned to take a job as head counsel for Procter & Gamble. Hmmm … maybe P&G is trying to stay prepared.

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