Due to the rapidly changing conditions in the field of agricultural products and foodstuffs, the Office limited the investigation to the entire supply chain of five selected basic agricultural products and foodstuffs, namely cow's milk, butter, chicken meat, chicken eggs and wheat flour. Compared to regular sectoral surveys, this survey was carried out in a shorter period of time and a considerable amount of data was evaluated.
As part of an abbreviated sectoral investigation, the Office focused on possible violations of the law, i.e. on possible abuse of a dominant position or the conclusion of prohibited agreements, and at the same time its goal was to analyze the structure of individual markets, or market segments, the market power of individual entities operating in these markets, and also take into account, for example, the role of import and export within the entire supply chain. With regard to the steep growth in consumer food prices, the Office also investigated prices and trade margins in individual links of the supply chain, as well as their dynamics.
As part of the investigation, the Office approached almost 200 competitors operating at individual levels of the supply chain, as well as 14 professional and industry associations, unions and associations, with requests for documents and information, and conducted online or oral negotiations with selected associations.
At no level of markets, or of market segments, the Office did not find or receive essential indications indicating the existence of a prohibited cartel agreement. Of course, it cannot be said with certainty that such an agreement does not exist, and the Office will therefore continue to monitor the situation on the food markets and, in case of reasonable suspicion of the existence of a prohibited cartel agreement, will initiate administrative proceedings.
No dominant competitor was found to exist in any of the markets. In many cases, the Office has concluded that the investigated markets are transnational in nature. Any vertical integration between producers and processors on the investigated commodities also did not show the existence of a systemic problem.
Examining the development of average commodity prices yielded different results. Some commodities show a gradual increase in the share of sales of private labels (milk), for some, on the contrary, it is clear that their sales ratio is stagnating (butter). Significant differences in price between private labels and branded products were also found for some commodities (flour), and on the contrary for others the price was almost identical (butter).
Examining price developments confirms that retail sales work with an average margin and there are no separate markets for individual commodities. The investigation showed that, in certain periods, some commodities were sold at retail with a very small or even negative trade mark-up (butter), while others, on the contrary, show a stable high trade mark-up (fresh cow's milk).
From the point of view of the development of the average trade markup, the investigation showed that this markup, especially in the retail trade, shows a relatively constant amount for individual commodities, so it is unlikely that the rise in the prices of these commodities recorded in the past months was caused by an agreement in this sense.
However, the investigation also showed that the increased costs are able to successfully pass on all members of the vertical to the end consumers and thus maintain their business markup. However, this behavior, if it is done in an uncoordinated manner, is not a violation of economic competition.
The analysis of the trade margins of the individual links of the agricultural and food chain brought a number of important insights that could guide the public discussion regarding food prices in the future. Above all, the analysis showed that for the selected five basic commodities, the highest part of the consumer price usually falls to the primary producers. Of course, the latter usually also has the highest production costs, whether it is human labor, feed or fertilizers, agricultural machinery or fuel and energy. The trading margins of processors and traders are at similar levels, but usually slightly in favor of traders' margins.
Regarding the issue of rising consumer prices, it is not possible to draw a completely convincing conclusion based on the collected data that one specific link in the supply chain is responsible for the sharp increase in prices in recent years. As inflation in the Czech Republic progressed, there was a gradual increase in the trade margin in all three main links of the supply chain, probably as a result of the increase in costs associated with production or trade. With regard to the development of prices, it is also evident from the data presented that the situation in 2023 could already bring some stabilization on the markets and in some cases even a slight drop in prices. This decline has even already occurred for some products.
Overall, it can be summarized that the investigation on the markets of the given commodities did not show a failure of economic competition, or the existence of a market structure where any player would have a dominant position. Considering that this structure did not change much in the observed period, and yet there was a sharp increase in prices recently, it rather points to the effect of external factors leading to a steep increase in costs than to a sudden failure of the markets as such. The fact that the prices on the counters do not exactly copy the development of commodity prices is caused by long-term contracts and the fact that these prices are also reflected in the increased costs of the past period affected by the economic repercussions of the covid-19 pandemic and, above all, by Russian aggression in Ukraine and its effects, especially on fuel and energy prices.
With this in mind, in the current situation it is not possible to recommend regulation in this area in the form of, for example, the introduction of price ceilings, which could lead to a shortage of regulated commodities.
The Office's findings regarding the listed types of food confirmed earlier conclusions from the conducted investigations of food retailing initiatives in the last decade, which did not reveal anti-competitive conduct. On the contrary, in a number of cases it proved that there is strong competition between individual chains in food retail. Regarding the increase in food prices in the last two years, the Office's investigation showed similar conclusions to those recently reached by a number of competition authorities in other European countries. In no European country has it been confirmed that an increase in food prices by tens of percent occurred as a result of anti-competitive behavior. None of the European competition authorities has been able to prove a cartel agreement or abuse of a dominant position in connection with the increase in food prices. Competition between businesses alone cannot erase inflationary pressures in the order of tens or hundreds of percent. However, it certainly contributes to the slower growth of inflation and its earlier slowdown, which we are already noticing in the food sector.
