Territorial Supply Constraints – Time to close the gap

Retail and wholesale plays an essential role in providing EU consumers and business customers with choice, innovation and affordable prices. For consumers across Europe, price remains key. Faced with a severe cost of living crisis and uncertainty, consumers are seeking savings when shopping and have been buying less for several years now. Governments and competition authorities have been looking at our sector to support citizens through the cost-of-living crisis – including through regulation seeking to  counter price inflation  through regulation of margins, amongst other methods.  

This hits retailers and wholesalers’ hard, putting further pressure on retailers’ and wholesalers’ already low margins (typically between 1-3%). Coupled with the highly competitive grocery retail landscape, many are seeking efficiencies, including in purchasing.  

A unified Single Market would enable retailers and wholesalers to more efficiently and effectively serve consumers. However, market fragmentation remains prevalent in our sector. 

Many rules targeting our sector often encourage national sourcing, such as differing labelling requirements between countries. Enrico Letta, in his 2024 report on the Single Market, explained that re-nationalising markets for sourcing will hurt consumers. This year, Mario Draghi said that Single Market fragmentation within Europe was much worse than the US tariffs.  

Territorial supply constraints have been afflicting retailers and wholesalers for years. This refers to a deliberate practice to fragment the Single Market to enforce different prices across countries and ensure that products cannot be sold in a market for which they are not intended. Usually, this translates into limitations on languages used on labels, or different packaging sizes or colours for the same product.. These practices are costing European consumers at least 14 billion euros every year, across four product categories, according to a European Commission study of 2020. A cost that, at times of a severe cost of living crisis, is very difficult to defend. 

The Commission has gathered feedback across the EU that explains how large manufacturers refuse to supply and redirect the retailers and wholesalers to national sales offices, creating artificial boundaries to cross-border trade.  

The time has come for the European Commission to close the gap. Competition rules catch dominant large manufacturers. But, they do not catch those not dominant players that are still able to deliberately fragment the Single Market, for example, by using national sales offices to stop cross-border sales.  The Commission has investigated and found AB InBev and Mondelez guilty of deliberately fragmenting the Single Market with the intention to increase the prices they can make consumers pay across the EU.  

We urge the European Commission to swiftly start an impact assessment and propose legislation, for instance using the non-discrimination principle in the Geo-blocking Regulation to apply to business-to-business transactions. In a fully functioning Single Market, suppliers should be obliged to offer their products to all customers regardless of their country of origin. Retailers and wholesalers should be able to choose where in the EU they want to buy their products, just like individual consumers, and other economic sectors, can do already today. 

The forthcoming Single Market Strategy is an opportunity for the European Commission to create a real Single Market for All. Everyone operating or living in the Single Market should benefit from what it brings and all should be responsible. Member states also have a role and need to remove barriers to the free movement of goods such as labelling rules or language constraints that help territorial supply constraints continue to be used or who enact rules that encourage national sourcing. This is also the time for the European Commission to be bold and enforce the rules that protect the Single Market.  

Prohibiting territorial supply restrictions is the right thing to do. With current geopolitical and inflationary pressure, there is no time to waste. In the interest of European consumers: Act now and close the gap.