According to media reports, the prices of premium brands in Dutch supermarkets have increased these past years. This is not expected to change in the short term. It has given rise to a great deal of commotion, in particular about the allegedly high consumer prices for food compared to other EU countries. Politicians have now also picked up on this, as apparent from the videos of Jesse Klaver, a GroenLinks-PvdA member of parliament (see here) and the media appearance of NSC party leader Pieter Omtzigt (see here).
There are various interpretations of the reason for these high prices. Several retailers blame the fragmentation of the internal market caused by ‘territorial supply constraints’ (“TSCs”) imposed by manufacturers. Retailers note that certain national legal obligations (such as the obligation that information on product labels must be in Dutch) complicate the parallel import of products that are offered cheaper in other Member States and should therefore be abolished (see the CBL Position Paper on TSCs in this regard). These obligations allegedly allow producers to charge different prices in different countries for the same products (see here). Producers, on the other hand, point to the purchasing power of supermarkets (through purchasing alliances), different consumer preferences per country, or production and transport costs.
Minister Heinen of Finance argued in a debate in the Lower House that these TSCs should be abolished in order “to harmonise the internal market in Europe”. On 11 March 2025, a motion of the NSC and PVV was adopted in a debate in the Lower House related to the high grocery prices in the Netherlands. This motion calls on the government to investigate which laws and regulations prevent supermarkets from buying cheaper products abroad. It also calls on the government to have the Netherlands Authority for Consumers and Markets (“ACM”) investigate the impact of purchasing constraints on the Dutch market and to take enforcement action in the event of violations of competition law. A motion by the SP to give the ACM the power to regulate the prices of groceries was also adopted.
In sum, obstacles to parallel trade are a hot topic. We will address this in more detail in this blog. First, we will briefly discuss the rules on obstacles to parallel trade. We will then demonstrate on the basis of a number of practical examples from the European Commission (“Commission”) where things can go wrong. Next, we will address the latest legislative proposals. Our conclusion is that it is not certain whether the proposed laws and regulations will actually lead to the intended lower prices in the supermarket.
When is the obstruction of parallel trade prohibited?
Customers (traders or retailers) usually try to purchase their products in Member States where prices are lower, in order to then sell them in Member States where prices are higher (known as arbitrage). Under normal circumstances, such parallel trade leads to price reductions in countries where prices are high.
Obstacles to parallel trade may lead to the maintenance of price differences, but are not always prohibited. Such obstacles may be justified, for instance, because they take advantage of differences in purchasing power between countries, but also because of the product’s shelf life, more efficient distribution, consumer preferences, and national regulations (more on this below).
Price discrimination in B2B relationships is not prohibited in and of itself. In its Parker judgment, the European Court of Justice ruled that a unilateral pricing policy of a supplier that does not have a dominant position is permitted, also if it may lead to the maintenance and protection of the various national markets.
In certain circumstances, obstructing parallel trade is prohibited under competition law. Unilateral action by a dominant supplier may constitute breach of the prohibition on abuse of a dominant position (Article 102 TFEU). If an obstacle to parallel trade forms part of a distribution agreement, for instance, it may be in violation of the cartel prohibition (Article 101 TFEU). The authorities regard such practices as one of the most serious forms of distortion of competition.
Practical examples from the European Commission
In practice, the competition authorities also pay attention to the obstruction of parallel trade. On 23 May 2024, for instance, the Commission imposed a €337.5 million fine on food company Mondelez for restricting parallel trade. According to the Commission, Mondelez violated competition law (i) by entering into anti-competitive agreements and/or concerted practices to restrict cross-border trade in its products (Article 101 TFEU); and (ii) by abusing its dominant position in national markets for the sale of chocolate bars (Article 102 TFEU) (see our earlier blog in this regard). The Commission furthermore fined Ahlers, an exclusive Pierre Cardin distributor, €3.5 million in November 2024 for restricting parallel trade.
The obstruction of parallel trade has been on the Commission’s agenda for some time. In 2021, for instance, the Commission imposed a fine of €7.8 million on Valve, the parent company behind the PC gaming platform Steam, for restricting the cross-border sale of certain PC video games based on the geographical location of users (‘geo-blocking’). Earlier, in 2020, the Commission imposed a €6.7 million fine on the Meliá hotel group for restricting parallel trade by giving consumers access to different offers and prices based on their nationality or place of residence. Food company AB Inbev was furthermore fined €200 million in 2019 for restricting parallel trade. That same year, the Commission also fined Nike and Sanrio (a Japanese company known for Hello Kitty products) amounting to €12.5 million and €6.2 million, respectively, for restricting the parallel trade of merchandise.
Developments in laws and regulations
Various studies show that TSCs exist in various forms in the retail sector within the EU (see here and here). As stated above, provided that no economic position of power or cartel agreement is involved, obstacles to parallel trade fall outside the scope of competition rules. That is why politicians have been discussing new rules to restrict obstacles that ‘get off scot-free’. A case in point is the letter to parliament from the Minister of Economic Affairs and Climate Policy dated 27 November 2023. In that letter, the minister calls – in response to a report by Ecorys – for obstacles to parallel trade to be put on the agenda at the European level.
On 23 May 2024, eight Member States, namely the Netherlands, Belgium, Denmark, Greece, Croatia, Luxembourg, Slovakia and the Czech Republic, proposed an approach to restrict obstacles to parallel trade. The proposal involves a ban on discrimination based on the place of establishment in trade between companies and is intended as a supplement to the “competition law route” to tackle obstacles to parallel trade at the front end. The exact nature of the ban is not yet known. The idea is to ban “discrimination against businesses, such as retailers, based on their place of business” in combination with a shift of the burden of proof “to the supplier/manufacturer”. There is also talk of extending the Geo-blocking Regulation – which currently applies only to Business-to-Consumer (B2C) and to businesses that are end users – to include Business-to-Business (B2B) (see also the CBL Position Paper). The Commission’s Single Market Enforcement Taskforce furthermore launched a fact-finding exercise in May 2024 in this regard, aimed at better implementation and enforcement of the EU’s internal market rules, also with a view to possible TSCs. A questionnaire was sent to Member States as part of this exercise.
It is clear that sufficient attention is being paid (also in politics) to obstacles to parallel trade in the form of TSCs. This has given rise to various new laws, regulations and legislative proposals, in the hope that they will lead to lower prices for consumers. It depends on various factors whether this will actually be the case.
Are these new laws and regulations necessary?
As stated above, there are several legitimate explanations as to why prices are higher or lower in different EU Member States. One possible explanation as to why producers charge different prices is that their market positions may vary greatly from one country to the next, and they have to adjust their strategy accordingly. If a producer is entering the market for the first time, it will understandably be more inclined to temporarily charge a lower price or to invest in a promotional campaign, for instance, compared to a country where it already has an established market position. In these circumstances, it is understandable that the producer will wish to prevent the cheaper products or promotional material intended for country A from being exported en masse to country B. A spot check has in fact shown that supermarket chains that operate internationally also charge different prices for their private label products.
A second possible explanation is that consumer demand and preferences may differ per country. This applies to the actual product and its properties (such as its ingredients), as well as to the packaging and the maximum price that consumers are willing to pay for a certain product. Some customers will be more price-conscious than others. This can be due to purchasing power, but also to cultural differences. Differences in this willingness to pay can be exploited to charge customers different prices for the same product.
A third possible explanation is the difference in laws and regulations between Member States. In addition to the labelling regulations referred to above, these may include, with regard to foodstuffs, different national regulations in the area of food composition and the existence of different programmes for recycling and waste disposal (see the report by NERA on behalf of the European Brands Association).
Price differences for one and the same product have been occurring in numerous sectors for decades and are not necessarily a problem from an economic perspective, according to a survey by the OECD. In fact, they generally have pro-competitive effects and can actually lead to increased consumer welfare: charging different prices to different customers can also serve the group of consumers with a smaller budget who would not have bought the products, or would have bought fewer of them, if the higher uniform price had applied. The downside is that consumers with a greater willingness to pay will pay higher prices (see also this article).
In addition to the legitimate explanations presented above for the difference in grocery and other prices between Member States, it is uncertain whether the proposals to abolish TSCs will actually lead to lower consumer prices: negative consequences (for consumers) are also possible. Will it still be possible, for instance, for a producer to lower its price locally in order to enter a new market, without running the risk of having to apply that price to all buyers in the European Union?
It is also unclear what the effect on prices will be in the cheaper countries if producers are de facto forced to sell at a single uniform price. Finally, it is not a given that a price advantage, if any, that does arise will be passed on to the consumer in the form of lower retail prices, or that this will lead to a redistribution of the margin between producer and supermarkets, which are engaged in a fierce negotiation battle through international purchasing alliances.
Against this background, it remains to be seen whether it is wise for politicians to interfere in the abolition of these TSCs. First, because there are several legitimate explanations for the existence of different prices between EU Member States, and second because it is uncertain whether these proposals for new laws and regulations will have positive consequences for consumers. There is also a significant risk of market disruption.
It is important, however, to safeguard (at a European level) continued, sufficient and effective competition, by tackling obvious violations of competition law. The fines of hundreds of millions of euros referred to above for Mondelēz and AB InBev, and the recent dawn raids at various beverage manufacturers, demonstrate that the Commission does not shy away from exercising its powers.
Information on dawn raids by the ACM and the European Commission can be found at invalacm.nl.
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