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Commenting on the launch today of the Commission Action Plan for the European Pillar of Social Rights, EuroCommerce Director-General Christian Verschueren said:

“Retail and wholesale are a people business, serving people. We provide stable and fulfilling jobs for 29 million Europeans; that is 1 in 7 jobs. We value immensely the work of all our colleagues who have worked during the COVID pandemic serving our customers, keeping the shelves stocked with the daily essentials consumers need, and adapting to a massive shift to online sales. Yet, we do not take that dedication for granted. We reward people and ensure that they can work safely. In most countries, the employment conditions in our sector are subject to collective agreements, and this has worked well. Active social partnership is a tried formula for managing and building consensus around changes in business and in the jobs people do. We therefore naturally support Commission efforts to promote social dialogue and socioeconomic convergence. But this should go with the grain of what is already in place nationally and be within the boundaries of the EU treaties.”

And while food retailers have been working hard to keep the food supply chain running smoothly, companies and employees in the non-grocery sector have faced restrictions, along with business uncertainty and job insecurity, for almost a year. We are seeking help in EU and national recovery plans to help investment in resilience for all our sector, and in equipping our companies and employees to play a key role in the digital and sustainability transition.

National law and practice have made collective bargaining the norm in retail and wholesale, with collective agreements providing appropriate levels of protection for employees. Some 88% of staff in our sector are on permanent contracts and are ensured good levels of social protection. Women account for 62% of the workforce in retail and the sector gives millions of young people their first step-up into employment. As a sector, we are committed to giving all involved in retail and wholesale as good working conditions as possible. Experience has shown that autonomous collective bargaining, particularly through constructive engagement with our social partners at the level closest to the workplace, works better in agreeing positive change rather than top-down legislation.

It is thus not just a matter of principle, but also of practical common sense, that EU social legislation, such as the draft Directives on minimum wages and pay transparency, are adjusted to fully reflect the autonomy of social partners at national, sectoral and company level. The best way of meeting the current challenges is through stronger EU investment in promoting autonomous and voluntary social dialogue throughout Europe. This was why, together with our social partner UNI Europa and other leading players in the service sector, we recently called upon the Commission for capacity-building in this area and not pursue further proposed cuts to EU sectoral social dialogue.

Reacting to the multinational brand lobby group AIM’s call for an EU market investigation of retail alliances, EuroCommerce Director-General Christian Verschueren and Independent Retail Europe Director-General Else Groen have issued the following joint statement:

Europe’s retailers and wholesalers operate in a limited number of countries, and in a highly competitive market, with high fixed costs and low margins of 1-3%. Retail Alliances help create efficiencies and synergies in sourcing in the single market when dealing with powerful multinational brand suppliers who operate across the globe and enjoy margins some ten times higher than those of retailers. These suppliers are constantly presenting retailers with price increases bearing little connection to the product or the cost of producing it. Retail alliances also help mitigate the negative impact of territorial supply constraints imposed by large brand suppliers, which fragment the single market and lead to often significant and unjustified price differences across Europe. European retail alliances are all subject to clear governance principles to ensure compliance with EU and national regulation, including competition rules.

Last year in response to a call from the European Parliament, the Commission’s Joint Research Centre produced a report with very clear findings – that retail alliances can help competition by generating efficiencies and providing a countervailing force against large brand manufacturers, and thus lead to lower consumer prices. In November 2019, Commission Executive Vice-President Margrethe Vestager unequivocally recognised the pro-competitive effects of European retail and wholesale alliances: “Buying alliances between retailers have become a key component of grocery supply chains. They can bring lower prices to consumers for food and personal care brands that they purchase daily.”

Consumers have a wide set of competing options when they do their shopping. They will shop where price, convenience and availability of products makes most sense for them – be it online or offline. Retailers cannot thus be considered as ‘gatekeepers’ controlling access to the markets in which they operate: in a highly competitive market, a retailer who does not have a product on its shelf risks the customer simply going to a competitor. This is particularly true for the ‘must-have’ products supplied by increasingly concentrated multinational brand suppliers. They promote these products heavily, and increasingly sell their products direct to consumers in competition with retailers.

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We thank the Commission for the growing attention it has given to Territorial Supply Constraints during recent years. The DG GROW study published in November 2020 confirms issues that retailers and wholesalers have raised for many years and provides a welcome basis for future action to ensure that retailers and wholesalers can benefit from the single market for their sourcing.

Territorial Supply Constraints (TSCs) are practices imposed by brand suppliers when dealing with buyers with the aim and effect of segmenting the market and maintaining significant wholesale price differentials across countries. They are not justified by EU or national rules and standards, consumer preferences or the need to adapt to national circumstances such as differences in climate. They work to the detriment of consumers by restricting choice and maintaining artificially high prices. They mean that retailers and wholesalers are not able to choose sourcing when conditions are more favorable in other countries than where the retailer/wholesaler operates, to parallel import and/or distribute goods across their networks from one EU country to another. TSCs often also restrict retailers’ access to the supplier’s full range of products, while, at the same time, manufacturers are increasingly moving online to sell their whole range to consumers directly.

In this document, we comment on the DG GROW study and ask the Commission to address territorial supply restrictions as a priority to strengthen the resilience of retail and the agro-food ecosystems by allowing retailers and wholesalers to benefit from the single market for their sourcing and consumers to benefit from the efficiencies that this can achieve. We ask the Commission to use a combination of approaches including in competition rules and enforcement and clear guidance to operators. Should these avenues not prove sufficiently effective, we would recommend in due time the Commission to consider proceeding with legislation putting a stop on market fragmentation imposed by brands suppliers.

Key messages

• Territorial supply constraints are practices frequently related to strong brands: a few international suppliers control the majority of brands that retailers need to stock, and consumers expect to find in their stores; consumers are able to purchase products in another member state, but retailers are often not.

• TSCs stretch beyond a few anecdotal cases: the study confirms that TSCs are prevalent, and used as a means to segment the single market; they occur in categories of products that are common across the EU and in relation to brands which consumers particularly value;

• Variations in consumer prices across Europe cannot only be explained by cost factors alone: the econometric study confirms that wide price differences cannot be explained only by local economic conditions, labour, logistics and VAT costs;

• The consumer harm is significant: the study confirms that TSCs have an impact on consumer choice, prices and innovation, and that savings of an estimate amount of at least €14bn could be achieved if TSCs imposed by manufacturers were removed;

• Adaptation to local markets should not be confused with TSCs: adaptation to local markets is essential for suppliers, wholesalers and retailers; but practices such as price discrimination and product differentiation should not be used as an artificial means of preventing parallel imports and purchasing at an EU level;

• The study may underestimate the scale and impact of the problem: many SMEs that are part of buying groups or purchase from wholesalers, which are affected by TSCs but are not aware of it; there is also evidence that TSCs occur beyond the consumer-packaged goods sector;

• TSCs are not relevant to private labels: the study finds evidence that retailers may differentiate products and adapt prices to local markets circumstances but does not find evidence of practices hindering the free movement of these products.

Speaking today at the start of the EU Industry Days, EuroCommerce Director-General Christian Verschueren stressed the central role of the retail and wholesale ecosystem in supporting and driving economic recovery and Europe’s global competitiveness, but also a sector under immense pressure and in urgent need of help:

“As recognised by the European Commission, retail & wholesale is one of the essential ecosystems and one the worst affected by the COVID pandemic. Private consumption makes up over half of European GDP. As a consequence, the retail and wholesale ecosystem is pivotal to creating markets for the goods and services that many ecosystems produce, and it is crucial for the economic recovery. Yet, much of our sector, with millions of SMEs, is facing imminent bankruptcy and is in need of urgent help to continue and accelerate its digital and green transformation.”

With nearly a year of many non-food shops, and restaurants and cafes which food wholesalers supply, being shut or subject to severe restrictions, many businesses will, after COVID is beaten, never open again. Many town centres will face shuttered shops and restaurants, with a direct societal impact on the communities they served.  This is why help for our ecosystem under the Next Generation EU (NGEU) recovery fund and the EU budget will be vital to helping drive EU recovery.  But equally important are policy solutions to underpin this. We are dependent on the single market and open global markets and a regulatory framework which lets us do our job effectively, and in doing so, increase the competitiveness and vitality of the EU economy overall – another central objective of the recovery plan and Industrial strategy which we strongly support.

These are messages we have been underlining over the last year, calling for a European Pact for Commerce, with 10 investment measures and 10 policy measures. We will continue to call for those measures over the coming months as national governments prepare and submit national recovery plans, and the Commission assesses those. Getting the balance right in how the unprecedented funds under the NGEU are spent will determine the future of Europe as a globally competitive economy in a global, yet increasingly challenging trading environment.

Commenting on the launch today of the EU Trade Policy Review, EuroCommerce Director-General Christian Verschueren said:

”The COVID pandemic and restrictions arising from it have hit many businesses hard over the past 12 months and also hit international trade. The Commission review of the EU’s trade policy is a welcome step to reinforce the measures the EU and governments have taken to boost the economic recovery. Open markets in Europe and outside will be a powerful driver for the EU economy to pick up again.”

Retailers and wholesalers rely to open markets to ensure that consumers have access to a wide choice of the products they need.  We therefore support the concept of “open strategic autonomy” but will be pressing the need to ensure that this does not lose sight of the “open” part of the approach. Global value chains are a reality and key to European competitiveness, and trade has made a massive difference to the lives of many millions of people across the globe.  The COVID-19 crisis has shown the need for reliable supply chains, particularly for sensitive products. But it has equally shown that this is best achieved by diversifying, rather than restricting, sources of supply.

Our sector is committed to harnessing and accelerating the digital and sustainability transformation for the future competitiveness of Europe’s economy.  Trade should be used to help drive both, reducing barriers to investment in e-commerce and digital services, eliminating tariffs and non-tariff barriers on environmental goods and technologies, and promoting international standards and common circular economy definitions in trade agreements. The EU should also lead in encouraging a common approach to waste and recycling and promoting services to prolong the life of products.

Finally, we support the EU proposals on reforming the World Trade Organization (WTO). These are timely, with the confirmation of Ms Ngozi Okonjo-Iweala as new WTO Director-General and the stated aims of the new US administration to re-engage in multilateralism.

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Speaking today about decisions in some EU countries to close a number of their borders, EuroCommerce Director-General Christian Verschueren said:

“Retailers and wholesalers rely on many thousands of suppliers across Europe to ensure that Europe’s consumers can have the daily essentials they need.  We have consistently lived up to that obligation all through the COVID pandemic. We also fully support all measures necessary to stop the spread of the virus and its new variants. But this can be done without making border crossing impossible for lorries carrying the goods consumers need. We therefore wish to remind all member states of the real problems which arose for goods traffic and cross-border workers last year when borders were closed, and of the important guidelines the Commission issued to resolve those problems. We all want people to be safe, but also able to have the things they need to help them have as normal a life as the present - abnormal - circumstances allow.”

The first wave of the pandemic last year sparked off a series of border closures which member states believed would help stem the spread of the COVID virus. In doing so, they initially gave little thought to the impact of such closures on cross-border flows of goods which consumers and industry needed to have available every day.  They also prevented many thousands of workers living one side of the border from getting to their workplaces on the other side.  The Commission acted quickly to issue harmonised guidelines which set up ‘green lanes’ for goods traffic and special arrangements for cross-border workers.  Those are still valid and vital in the second wave we are experiencing now. We are therefore asking member states, not least those which also act as transit routes for exports from other EU countries, to adhere to those guidelines, and adopt proportionate measures to keep their citizens safe while not unduly hindering the flow of goods and cross-border workers within the single market.

Noting the European Parliament’s adoption today of the own initiative report drafted by Jan Huitema MEP (Renew, NL) on the Circular Economy Action Plan, EuroCommerce Director-General Christian Verschueren underlined the retail and wholesale sector’s commitment to the circular economy and the important role which Eco-design can play in this:

“Our sector has already shown its readiness to undertake a wide range of measures to reduce the environmental impact of how it does business and of the products it sells. The report from Jan Huitema makes an important point – that we need to address circularity in a holistic manner. Research shows that 80% of the environmental performance of a product can be achieved at the design phase. The proposal to review the Eco-design directive is important in providing the right framework for sustainable consumption, and likely to be more effective than rather less well-defined and less easily achievable targets for reducing overall levels of consumption.”

Retailers and wholesalers have been active advocates and drivers of sustainability and circularity. We believe strongly that the transformation of Europe’s economy to become more circular needs a major change in the way all stakeholders think and act, and above all, how they work together, whether in industry, distribution, consumers or in governments. Our sector is more than ready to do its bit, but this will only work if it is in concert with the whole supply chain and within a regulatory framework which facilitates the steps needed to achieve a circular economy.

BUSINESSEUROPE, EUROCHAMBRES and EUROCOMMERCE have been consistently stressing the importance of the services sector to the EU economy, businesses and consumers alike. Economic activity in Europe remains disproportionately hit by Covid-19, and the service sector will be crucial to accelerating Europe’s recovery.

The overall post-2019 contribution to the EU economy from services is estimated at €389bn or 2.28% of EU GDP, and a further €284bn of gains would be possible under full implementation of the Services Directive*. The growing trend for EU industry to offer substantial services alongside their products and use services as input also provides a major opportunity to both service providers and industry: services generate 27% of the value added in EU manufacturing compared to 20% in the US; yet our productivity in services is only around half that of the US level**. It is therefore clear that significant growth potential remains untapped as long as there is no free movement of services in the EU.

The European Commission’s Long-term Action Plan for Implementation and Enforcement of Single Market Rules partly acknowledged the current situation with the measures on services it foresees. However, a difficult political debate caused a set-back to the agenda on services as the Commission was forced to withdraw the remainder of the 2017 Services Package.

Our business organisations are absolutely clear that implementation and enforcement of the existing framework, particularly the Services Directive, should be given the highest priority. Vigorous monitoring of how the principles of proportionality, necessity and non-discrimination enshrined in the Directive are followed by Member States is key, and transparency and corrective measures in cases of non-compliance are vital. The present crisis caused by the COVID pandemic and uncoordinated measures taken by Member States make the case even stronger, and we see cross-border provision of services under heavy pressure. The Services Directive Expert Group could also play a stronger role in ensuring proper application and implementation of the Directive.

Our organisations would like to draw the Commission’s attention to Article 41 of the Services Directive, requiring the Commission to table “a comprehensive report on the application of this Directive” every three years, starting 28 December 2011. In line with this, a regular report was due on 28 December 2020. The legal requirement provides the Commission with an excellent opportunity to give new impetus to the implementation of the Services Directive.

We understand that the COVID crisis has inevitably delayed work on a number of Commission dossiers, but we hope to see the Article 41 report in the coming months, and that the Commission on that basis will work to further develop a culture of compliance and transparency among Member States. BusinessEurope, Eurochambres, EuroCommerce stand ready to support these efforts.

Yours sincerely,

Markus J. Beyrer, Director General, BUSINESSEUROPE

Ben Butters, CEO, EUROCHAMBRES

Christian Verschueren, Director-General, EUROCOMMERCE

Welcoming the launch of a Commission investigation into a new case of possible blocking of parallel imports by a food manufacturer, EuroCommerce Director-General Christian Verschueren said:

“While not wishing to preempt the outcome of this particular investigation, we are happy to see the Commission taking further action on territorial supply constraints. This is an issue we have been flagging for many years and whose impact – a cost to European consumers in the magnitude of €14 billion - was confirmed in the Commission study released last November.  Brand manufacturers fragment the single market to maintain artificial price differences across Europe. This means consumers paying more, and the efficiencies, which the single market is there to achieve, being undermined.  At a time when the European economy needs all the help it can to recover, this is not the right way to go. That is why we are asking the Commission to find a lasting solution to allow the single market to work for sourcing.”

Territorial Supply Constraints (TSCs) are practices imposed by large, often multinational brand manufacturers to oblige retailers and wholesalers to source only from their distributor for the country in which the buyers operate. These are enforced by a number of coercive measures to stop parallel imports or even transferring products to their own operations in another country.

This means that, while manufacturers can concentrate their production in one or a limited number of facilities, use the single market for their own sourcing and to distribute across Europe, retailers are prevented from sourcing centrally or organising their own logistics on a European basis. This results in inefficiencies in the chain, and, most importantly for consumers, higher prices, less choice and less innovation.

The Commission study released in November 2020 showed that TSCs most often occur where a large, leading brand manufacturer has a strong market position, and their products are ones which are commonly available across Europe and consumers expect to see on the shelves.  These include soft drinks, coffee, personal care, confectionery and household care products. TSCs can take many forms: refusing to supply certain products (a problem identified by 46% of respondents), differentiating products though packaging (30%), obliging to accept that the product can only be sold in one destination (29%), differentiating product content (27%), limiting purchasing quantities (24%), or restricting promotions (15%). The study concluded that consumers could save €14bn if TSCs were removed.

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The origin of European social dialogue lies in the EU’s decision to address social and economic issues arising from the creation of an EU single market through discussions between representatives of employers and workers (Art. 154f). Social dialogue has been the cornerstone of the social dimension of the single market.

The services sectors, that we represent, are the backbone of Europe’s economy. They underpin both growth and job creation, as well as Europe’s competitiveness in the world. Our social dialogues are key instruments for developing both quality services and jobs. At the same time, technological advances, such as digitalisation, have led to significant changes in the services sectors, resulting in possible overlaps between some European sectoral social dialogues.

During the Covid-19 pandemic, the services’ sectors have proven their importance and enabled our economies and societies to keep going. At European level, sectoral social dialogue of the services sectors has provided the framework for the discussion and adoption of joint statements, recommendations, and guidelines and proved to be an essential channel to communicate sectoral needs to the European institutions. Services’ social partners emphasised the importance of a constructive sectoral social dialogue. Sectoral social dialogue was instrumental in engaging common discussions in the sectors on the consequences for the ‘after Covid-19’ world of work as well as the requirements for recovery.

Our initiative to discuss common challenges among the European sectoral social partners from the services sectors complements our respective social dialogues’ endeavours. We welcome the opportunity to highlight the importance of European sectoral social dialogue and look forward to exchanging further on how to strengthen it during these critical times.

1- European social dialogue supports and complements social dialogue at national level by bringing together the experience and expertise of social partners, therefore adding value to the organisations and their members on both sides of each industry. Social dialogue contributes to achieving the objectives of full employment, social progress and the fight against social exclusion laid down in Art. 9 TFEU. Effective social dialogue at all levels is also a tool to re-build trust in the European project at large, to counter populism, and to contribute to economic recovery.

2- European sectoral social dialogue is distinct from cross-sectoral social dialogue. European social dialogue is an autonomous dialogue between employers and trade unions. With their specific knowledge of each sector, sectoral social partners are those that have the capacity to negotiate according to national law and practice. This particularity allows the social partners to guide policymakers in passing legislation that accurately reflects the needs of each sector. The sectoral social partners are in a better position to deliver a concrete picture of each sector and can provide specific data that can be used in the design of policy proposals. This particularity also enables the social partners to actively initiate a legislative procedure when the requirements are met. The European Commission therefore has an obligation to facilitate and promote social dialogue.

3- Sectoral social dialogue at national and European levels is an important instrument in terms of change anticipation and organising transition by finding and implementing joint solutions based on sector specific experiences. This applies in particular to the green and digital transitions. Key issues also include the employment and social dimension of the European single market for services, skills agenda, demographic change as well as new and diverse forms of work, the platform economy, working conditions and social protection. The European social partners contribute to addressing such changes, not least by formulating joint responses in the forms of guidelines, joint opinions, recommendations or action plans.

4- Many of these changes follow similar patterns in different services sectors. The services social partners therefore intend to develop more regular exchange across their sectors on common issues, notably on aspects that have social consequences in the services’ industry as a whole. While ensuring the role of the individual sectoral social dialogues, such cooperation can also contribute towards increasing the weight given to the services sectors in EU policymaking and better aggregate input by key stakeholders. The services social partners therefore ask the European Commission to facilitate such a process – one option would be a regular forum of exchange for services social partners.

5- Sectoral social partners should be involved in the EU’s policymaking process, notably through their social dialogue committees by mutual agreement. They can in particular contribute to sector-specific initiatives by adding their social partner expertise. Services’ social partners encourage the European Commission to consult the relevant European social partners from the earliest stage possible before the drafting of a policy proposal begins. This includes input to the Regulatory Scrutiny Board. Where relevant, they also encourage the European Commission to involve them systematically in monitoring the implementation of sector-specific legislation and policy.

6- The respective Directorates General (DG) that lead on a given initiatives should involve DG EMPL and interested sectoral social partners throughout both the policymaking and implementation processes. Social partners would welcome the idea of having a dedicated office in each relevant DG, responsible for social dialogue and social affairs as it is the case already for some sectors (eg Maritime transport and Fisheries).

7- European Social Dialogue relies on a strong national membership. Services social partners are ready to engage together with the European Commission in capacity-building activities to develop, promote and strengthen sectoral social dialogue, in particular in Central and Eastern Europe, taking into due consideration the diversity of industrial relation systems. The European Commission should make further dedicated funding available to social partners and make funding opportunities for social dialogue support more transparent. The current social dialogue project budget lines are of limited suitability for this purpose and should be revised.

8- Outcomes of European social dialogue (agreements, process-oriented texts, joint opinions and tools), are only meaningful if they can be discussed, translated and used by respective national social partners and/or by contributing to a common European level approach. The European Commission should support and facilitate this process and its functioning, by promoting and facilitating social dialogue in those countries where it is underdeveloped. Exchange among sectoral social partners on this and the implementation of targeted projects aimed to raise awareness on European social dialogue could be mutually beneficial. The European Commission and governments should substantially increase the visibility they give to joint outcomes of sectoral social dialogue, within and outside their institutions, and especially in the context of legislative and non-legislative processes.

9- One of the most important expressions of European social dialogue are sectoral social partner agreements. While we accept that the Commission’s role as the guardian of the Treaty includes ensuring that social partner agreements are in line with the law, we stress that the social partners are those who know best what is appropriate and beneficial for their industry in terms of social matters. The European Commission has an obligation to respect the autonomy of social dialogue. Under the condition of a request by recognised European social partners, it should facilitate the conclusion and implementation of their agreements in line with Art. 155 TFEU. Services’ sectoral social partners welcome the expressed endeavour to address the fact that there is no functioning process at European level for sectoral agreements. Services’ sectoral social partners fully support the recommendation to establish a clear process in that regard for the future. Social partner agreements can be autonomously implemented in close cooperation between the social partners and the European Commission services in innovative ways that derive concrete benefits for both management and labour.

10- Budgets for sectoral social dialogue are being reduced and/or re-assigned. Administrative work to organise European social dialogue activities has been increasingly moved from the European Commission on to the social partners. Such work, whether it be running EU funded projects or organising social dialogue meetings constitutes in many cases excessive and unnecessary burdens. This is a clear and alarming political move from the European Commission towards a reduction of resources away from social dialogue. The European Commission should review its approach with a view to allow social partners to focus on their core role in social dialogue and, indeed, provide more resources for capacity-building.

11- The representativeness of the social partners derives from their mutual recognition; it is intrinsic to their nature and is at the core of their autonomy. Representativeness studies conducted on behalf of the European Commission are an important element in supporting the development of social dialogue and the autonomy of the social partners.