European Commission Adopts Retail Market Monitoring Report

July 12, 2010

On July 5, 2010, the European Commission adopted a retail market monitoring report identifying the key issues that potentially hamper a more efficient and fairer retail services industry within the EU. The retail services industry is economically significant to the EU, representing approximately 4.2% of EU GDP, employing nearly 18 million people in the European economy and acting as a link between many upstream and downstream markets. The Commission is soliciting public comment, due by September 10, 2010, on the new systemic approach to Internal Market policy making and the problems that have been identified in the report. The comments will factor into the development of measures to address these key issues to be presented in the forthcoming Single Market Act expected in the fall of 2010.

The report covers the full range of retail service forms, formats, products, legal structures and locations, but focuses in particular on grocery retail services, given their economic importance (representing about half of total retail sales in the EU). The report takes a new systemic approach which not only evaluates the economic performance of the retail sector but considers all economic, social, environmental and consumer impacts by accounting for the linkages that the retail sector has with its upstream and downstream markets. The aim is to develop measures to help retail companies in the EU make the best use of internal market freedoms to stimulate growth and promote innovation while respecting the objectives of economic, social and territorial cohesion, together with worker, consumer and environmental protection. Retail services that are smart, sustainable and inclusive are defined as “fair” and will contribute to the success of the Europe 2020 Strategy.

Key Issues for the EU Retail Sector

The report identified the following issues which are having, or are likely to have, a direct impact on the performance of the retail sector in the EU:

1.  The following problems were identified as affecting — or having the potential to affect — the performance of retailers in terms of accessibility (lack of cohesion between the location of shops compared to existing home locations and means of transport) for all EU citizens to a varied range of competitive retail services respecting the requirements of sustainable development:

  • A lack of efficiency and diversity across commercial planning rules together with malfunctioning of the commercial property market have an adverse impact on where retailers choose to establish shops and accessibility for consumers;
  • Insufficient development of electronic commerce in the internal market, as a result of a series of obstacles (cross-border postal services, means of payment, poorly functioning systems of redress, etc.); and
  • Underdevelopment of commercial communication and independent information services (for example, internet price comparison sites, including cross-border ones, or comparative tests of products and services) probably resulting from persisting differences across national consumer protection and unfair competition rules and from difficulties in comparing across quality control systems for goods and services and their respective environmental or social criteria.

2.  The following problems have been identified as hampering, or likely to hamper, the optimum growth of operators, in particular their ability to invest and innovate with regard to the quality of products and services offered:

  • A lack of rules governing unfair commercial practices and contractual relations between the various parties in the supply chain and/or poor application of the rules where they do exist; and
  • A lack of transparency of quality control systems and associated difficulties in their cross-border use.

3.  The following problems have been identified as affecting working conditions, labor productivity, employment levels and competitiveness in the retail sector:

  • Differences in working conditions caused by differences in labor law and collective agreements applicable to retail services;
  • The negative impact of the informal economy on working conditions;
  • A lack of consumer information on the social responsibility of retail service companies; and
  • A mismatch between the skills needs of companies and those of staff in the retail sector.

4.      The following problems have been identified as having the potential to impede the transition to a more sustainable retail sector:

  • High energy consumption, considerable levels of waste production, significant contribution to commercial traffic flows and congestion in urban areas;
  • Insufficient consideration of environmental costs in the retail supply chain (logistics, energy efficiency of shops, marketing and communications, etc.), in particular where sufficient incentives are not made available; and
  • A lack of a common life-cycle methodology for evaluating the environmental impact of products and services sold.

It is always easier to identify the problems than to develop and enact legislation to cure them. It will be interesting to see the nature of the public comment on these issues, the extent to which individual countries will have differing priorities and objectives, and the measures that will ultimately result from this initiative. French Commissioner Barnier will take the lead in making final proposals under his powers to foster a European single market. The stakeholders have an opportunity to shape the European agenda for years to come in critical matters for the functioning of the supply chain, such as the definition and remedies applied to unfair commercial practices. Interestingly, this report on retail in Europe reflects and constitutes another element of the present European policy priority of promoting internet commerce as a single market facilitator.

Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have about these developments.  Please contact the Gibson Dunn lawyer with whom you work, or any of the following lawyers:

Fashion, Apparel and Consumer Products Group
Lois F. Herzeca – Practice Co-Chair, New York (212-351-2688, lherzeca@gibsondunn.com)
Andrés Font Galarza – Brussels (+32 2 554 72 30, afontgalarza@gibsondunn.com)

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