The challenges facing the modern commerce sector in the CEE region

Renata Juszkiewicz- Chairman of CEE Commerce Council

President of Polish Organsation of Trade and Distribution

Brussels, 8 November 2011

Central Eastern European Commerce Council

Representing commerce in 9 CEE countries:

Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Bulgaria, Estonia.

20 Oct. 2010 Common Communique

Central Eastern European Commerce Council

To voice common concern about restrictions impairing our industries and the national economies of CEE countries

To prevent the “spillover” effect of harmful laws and restrictive policies

Central Eastern European Commerce Council

To build a network to object to restrictive laws and polices in the region’s countries.

To carry out advocacy activities towards the EU institutions in particular the Commission and the Parliament.

Contribution to the economy

Major impact on the transformation process in the CEE region

Groundbreaking impact on market economy

Modernisation of the sector

GDP growth

Country 1991(%) IIQ2011(%) Poland -7.0 4.3 Czech Rep. -11.5 2.2 Slovakia -14.6 3.3 Romania -12.9 0.3 Hungary -11.9 1.5 Bulgaria -11.7 2.0

Inflation rates

Country 1991(%) 2011(%) latest

Poland 70.3 3.9 Czech Rep. 56.6 1.8 Slovakia 61.2 4.3 Romania 170.2 3.4 Hungary 35.0 3.6 Bulgaria 338.5 3.3

Contribution to the economy

FI: 90 b EUR

Sales: 62 b EUR

New jobs: 390 000

New stores: 8 000

Contribution to the economy Made the region attractive to investors

Contributed to the growth of other sectors

Strengthened export market

Stimulated consumption and production

Breakthrough in food processing

Shopping in 1990’

Shopping at present

Benefits for consumers

Wide range of assortments

Low prices

Different modern commerce formats

Fostering changes in consumer behaviour

Quality and standard inhancement

Restrictions in the CEE region

Restrictions breach the EC Treaty: Art. 49 Freedom of establishment Art. 56 Freedom to provide services

Obstacles to the integrated internal European market.

Introducing discriminatory policies largely imposed upon big international retailers

Restrictions/Areas

Supply chain

Significant market power

Stores’ establishment Court policy

Code of Conduct

VAT

Types of restrictions

Definition of significant market power Payment terms for some products 30

days, fresh food 14 days Ban on products audit Ban on bonus and discount of the

private labels The liberty to terminate the purchase

contracts 60 days in advance

Types of restrictions

Placing the purchasing conditions on www

Obligations for domestic products quotas

Mandatory reporting of food imports incl. EU products

Exclusive penalization of retailers for quality and safety standards

Supply chain restrictions

Slovakia Act on unfair form in business Act on unfair form in business

relations between the buyer and relations between the buyer and supplier of goods consisting in foodsupplier of goods consisting in food /Complaint - 15 May 2008Complaint - 15 May 2008

Abolition: 1 April 2011Abolition: 1 April 2011 Memorandum of Ethic in Food industry Amendment to the law on foodstuff

Supply chain restrictions

Hungary Ban on unfair practices of

distributors in relation to agriculture products and the food industry towards suppliers

Poland Good Practices Code

Supply chain restrictions

Romania Food Trade Law No.321- Oct. 2009 Amended in Dec. 2010

Other proposals: To show the products purchasing prices to the

consumers To report product prices in a Price Observer

database on weekly basis To allocate sale spaces to national products.

Significant market power

Bulgaria Draft law amending the Act on

Protection of Competition

Latvia Competition Law of Latvia

Significant market power

Czech Rep. Act on significant market power in

the sale of agricultural and food products – lodged to the EC- no response!

A draft amendment to Act No. 143/2001 on the Protection of Economic Competition

A draft amendment to Act No. 526/1990 on Pricing

Courts policy

Poland Act on Combating Unfair Competition

Unfavourable Resolutions of the Supreme Court of Poland/ influence guidance on legal consideration

Discriminatory tax law

Hungary Trade, Energy, Telecommunication 2.5% net annual sales

Claims to EU Commission: 17Nov. 2010 Art. 107 ‚Treaty on the Functioning of the EU’

(unlawful state aid) Discrimination of foreign investors and Art.

401 EU- Guidelines 2006/112/EC

Hampering the establishment of stores

Hungary Amendment proposal in connection

with Bill “on the Amendments of an Act Required for Enforcing the Consideration of Sustainability in the Operation of Commercial Centres”

Misperceptions of Misperceptions of modernmodern retailretail Retailers are responsible for price

increases, especially of food products

Retailers restrict the access of national small and medium producers/suppliers in the stores, through slotting allowances

Retailers favor imports

Misperceptions of Misperceptions of modernmodern retailretail

Retailers make huge profits while the national producers are almost driven to bankruptcy

Retailers’ in-city presence affects traffic and kills small corner-stores

Retailers are a part of cartel arrangements and operate on a monopolistic basis

Government policy

The governmental initiatives based on protectionism

Short term thinking which inhibits growth of national economies.

Limit and prevent the capacity for certain forms of business models.

The governments try to shift the burden for agriculture to the commerce sector!

Consequences for the CEE

Increase in consumer prices Increase in inflation Increase in cheap imported products Decrease in domestic production Reduced product quality Barriers for establishment of new stores Damage of the positive image of our countries within

investor community Weakening of GDP economies based on internal market

The achievment of recent decades will witherDoes anybody benefit from that?

CEE CC appeal

European Parliament, the European Commission, member state governments

To closely examine the developments in the commerce sector in all the countries of our region.

To consider what action should be taken to improve the current situation.

To create effective EU-policy for further development of the CEE region.

Thank you !