Lawmakers to crack down on supermarkets

  • 2003-11-27
  • Staff and wire reports
VILNIUS - The Lithuanian government is drafting legislation that would impose tougher restrictions on the country's major retailers, who in recent months have come under increasing criticism for unfair practices and exerting more control over wholesalers.

Among the new restrictions in the Economy Ministry's bill would be a ban on the sale of goods at prices lower than the acquisition prices and a limiting on the number of sales than can be held in a year (no more than two per year and no longer than for four weeks).
The new law, which is being drafted to ensure transparency and equal competition in the retail trade sector, would take effect on Jan. 1 and would apply only to those retail companies with annual net sales of more than 50 million litas (14.2 million euros).
Suppliers hailed the news, while major retail chains said the restrictions violated free market principles and would restrict competition.
But it will be the consumer who will ultimately suffer the most, officials of the major retailers such as VP Market and Rimi Lietuva said.
But the growing market share enjoyed by the major retailers, coupled by reports of unfair practices, could prove to be sufficient to get the bill passed through Parliament.
Last month, for instance, it was reported the VP Market had started concluding contracts with suppliers on the basis of which the latter must commit to certain sales targets that, if unachieved, would entail penalties for the suppliers.
In other words, retailers want to essentially levy penalties on suppliers of less popular products for "taking up shelf-space" in stores.
Other violations cited in relation to major retailers include the imposition of advance payments for just putting products on the shelves and for marketing services to ensure that sales will be successful.
The director of the Vilkiekiu Pienine meat processor, Gintaras Biartasius, told Verslo Zinios that the major retailers practice dumping openly and are quite inventive in thinking up new ways to gouge suppliers.
Latvian suppliers have encountered the same problems with their retailers.
Ilze Garanca, the head of sales at Rigas Raugs, a yeast manufacturer, told Dienas Bizness that supermarkets had the tendency to decrease prices, while Intars Gailits, an employee of the grain processor Ievavnieks said that supermarkets were often reluctant to put small manufacturers' products on the shelves.
The development of supermarkets has brought fierce competition to retail trade in the Baltics and, quite expectedly, has forced many small and medium shops and distribution centers to close.
Now there is a risk at the other end: As the major retailers' market share grows, they may try to exert unfair influence on the wholesale market.