Retail chains law chided for restricting competition

A NEW LAW on Retail Chains, passed by parliament last week, has drawn immediate criticism from the European Union for being at odds with EU free movement of goods rules.
Although the law dropped a draft rule that retail chains in the country carry 70 per cent Slovak goods, the European Commission's main negotiator for Slovak entry, Dirk Meganck, said the new requirement that stores carry a "proportional" assortment of domestic products created "uncertainty".
"Producers and suppliers don't know what this term means. This uncertainty will have to be eliminated," Meganck said on July 3 at the last sitting of a joint EU-Slovakia entry committee before a decision on Slovak admission is expected to be given in December 2002.

A NEW LAW on Retail Chains, passed by parliament last week, has drawn immediate criticism from the European Union for being at odds with EU free movement of goods rules.

Although the law dropped a draft rule that retail chains in the country carry 70 per cent Slovak goods, the European Commission's main negotiator for Slovak entry, Dirk Meganck, said the new requirement that stores carry a "proportional" assortment of domestic products created "uncertainty".

"Producers and suppliers don't know what this term means. This uncertainty will have to be eliminated," Meganck said on July 3 at the last sitting of a joint EU-Slovakia entry committee before a decision on Slovak admission is expected to be given in December 2002.

Slovakia, which hopes to join the Union in 2004 with as many as nine other countries, is bound to work into its legislation EU rules in 30 areas, including free movement of goods and services.

The law, approved on June 25, aims to prevent large, principally foreign, retail chains from abusing their market power. The EU argues that it proposes non-market tools to achieve this aim.

"I am concerned that the introduction of obstacles to trade before EU accession may have a very negative impact on negotiations," Eric van der Linden, EC ambassador to Slovakia, warned top Slovak officials in a letter on May 20, when the draft was first being considered.

Domestic critics have been even more scathing of the law, which they say will both increase consumer prices and invite corruption.

The law outlaws what are known as 'listing fees' - payments from suppliers to retail chains for having their products included on store shelves. The act also bans supplier payments for retail chain marketing, obliges retail chains to pay suppliers for their products within 30 days, and forbids labelling of products by the retail chain's label only.

According to Adrián Ďurček, chairman of the board of COOP Jednota Slovensko - the largest domestic retail chain - these changes will increase retail chains' costs, and thus consumer prices.

"We will transfer the burden onto customers, and they will have to pay more," he said.

Ďurček added that defining what was meant by the "proportional" representation of Slovak products on store shelves could prove a headache, and put arbitrary power in the hands of store inspectors required to check up on retail chains such as Tesco and Carrefour that have blitzed the country in the past few years.

"The used term is vague and opens the door to corruption," he said, adding he would be interested to know what approach would be taken by officials from the Slovak Commercial Inspection Office (SOI), the body appointed to supervise the 'proportional' provision.

The SOI told The Slovak Spectator it had not yet prepared a stance. SOI spokesperson Danuša Krkošová said, however, that she had been "surprised" at the vagueness of the wording used.

But member of parliament (MP) Vladimír Faič, of the ruling coalition's left-wing Democratic Left Party (SDĽ), who proposed the law, argued that Slovakia had to look out for its own interests and protect small and medium enterprises against what he termed "abuse of power" by large foreign retail chains and big foreign suppliers.

Faič called the current wording of the law "a compromise, which should express a balanced representation of Slovak products." He added that the law was needed if Slovakia was not to find itself in the position of being dictated to by the EU.

"If we don't change the current economic trend, our approach to EU integration may lead to a stage when the EU says to us 'You met the political criteria, you implemented the legislation well, but where is the economy, which you want to integrate into the common market?" Faič told The Slovak Spectator July 2.

Ďurček said that Slovakia already had tools to protect domestic business, such as import protection measures, subsidies and protection against price dumping.

Although the law is set to take effect September 1, 2002, the matter may not be closed. Ďurček said his group and the Slovak Chamber of Commerce had appealed to President Rudolf Schuster not to sign the law and to send it back to parliament for further debate.

"I think the law is immoral because it restricts the free market," Ďurček said.

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