Grocery giants ParknShop, Wellcome accused of pressuring suppliers

Council says behaviour of Wellcome, ParknShop should be investigated as being anti-competitive

PUBLISHED : Friday, 20 December, 2013, 4:29am
UPDATED : Friday, 20 December, 2013, 4:29am

Supermarket giants ParknShop and Wellcome are keeping prices artificially high by pressuring suppliers not to sell to rivals who undercut them, the Consumer Council says.

The council says the new Competition Commission should investigate whether their behaviour is anti-competitive.

The watchdog yesterday released its latest study of the grocery market. It claimed the two chains had reached exclusive agreements with suppliers and facilitated a "recommended retail price" system for products.

Both activities can be illegal in the European Union, the jurisdiction Hong Kong used as a point of reference for the competition law passed last year which is yet to be put in operation.

ParknShop has 28.6 per cent of the grocery market while Wellcome takes 33.9 per cent.

"If supermarkets secure exclusive deals with a majority of suppliers for a vital product such as rice, consumers must go to the chains to shop," council member Thomas Cheng Kin-hon said.

Meanwhile, suppliers could find themselves under pressure if supermarkets found that smaller stores were selling their goods cheaper, the watchdog said.

Federation of Restaurants and Related Trades president Simon Wong Ka-wo said supermarkets sought a bigger profit margin than small stores.

"There are other shops which do not demand as much profit and … sell products more cheaply. But the supermarkets will complain," he said.

Suppliers are subject to harsh conditions, he added: ParknShop, with more than 260 stores, charges up to HK$300,000 to put a new product on shelves.

The council cited a survey of 43 suppliers, all but two of which said they made recommendations on price to retailers.

Some 37 per cent said bigger clients complained about competitors selling products at lower prices and sometimes asked suppliers to intervene. Another 40 per cent said they had exclusive agreements with chain stores. Some clients would raise questions or require prior consent for them to deal with other retailers.

Both supermarkets deny putting pressure on suppliers.

Wellcome said it "continues to uphold and respect free market principles". ParknShop said more than 90 per cent of in-store promotions were initiated by suppliers.

The council said that, given it lacked investigative powers, it "could gather no strong evidence that … supermarket chains have misused their market power".

A spokesman for the Competition Commission said it would begin to deal with individual cases when the Competition Ordinance that was passed last year aimed at distortion by companies with "substantial market power" comes into full effect.