The tensions between local producers and representatives of modern trade are well-known and have existed in the market for several years.

Abrupt Delistings

Over time, there have been several attempts to resolve the issue of shelf access for local producers through regulation. Notable examples include the 2016 amendment to Law 321/2009, which mandated that 51% of certain product categories be sourced from the short food supply chain, and Law 81/2022 concerning unfair commercial practices between enterprises in the agricultural and food supply chain.

Despite these efforts, the tensions seem to have reached an unprecedented level, with reputable producers complaining about abrupt delistings and parliamentary hearings taking place.

The most recent factor in the escalation is an in-depth market investigation initiated by the Competition Council, aimed at allowing producers to express their grievances regarding their relationships with retailers.

Interview with Adrian Șter

In this context, we revisited Mr. Adrian Șter, a lawyer specializing in competition law, who kindly agreed to answer our questions.

Meat.Milk: Good day, Mr. Șter! We are pleased to have you back in our pages! Let’s get straight to the point. Who is responsible for this tension, and how can it be resolved?

Adrian Șter: Good day, Mr. Stoian, and thank you for the invitation, it's a pleasure to see you again!

The tension between producers and retailers is absolutely normal and typical in relationships that have both common and conflicting interests.

Additionally, in our national context, retailers generally have a significantly stronger negotiating position than producers.

Retailers aim to maximize profit, which is a completely legitimate objective for any merchant. They strive to find the right mix of products that best meet customer expectations, are available in the necessary quantities, and meet the required quality standards. It's pointless to have the best product at a convenient price if, after gaining customer loyalty and ensuring constant demand, the producer cannot supply sufficient quantities or meet the demand's standards.

Moreover, inherent logistical limitations—limited shelf space and the limited number of products that can be listed—necessitate selection, preventing retailers from listing all the products they might want to.

Finally, retailers prefer dealing with a smaller number of producers to manage fewer commercial relationships, with their inherent difficulties, rather than handling numerous producers.

On the other hand, producers argue that in a market where modern trade accounts for approximately 70%, where consumers are increasingly aware of the advantages of local products, and where merchants announce ambitious development plans, presence on retailer shelves is essential to reach a critical mass of customers, regardless of product quality and price.

In other words, the best product at the most competitive price cannot ensure increased sales if it is not accessible to customers, if they have no way to purchase it.

Thus, the tension highlights a chicken-and-egg dynamic—producers claim that retailer support is fundamental to gaining the critical mass of customers that ultimately justifies their shelf presence, while retailers want producers capable of attracting the customer mass.

These points show that much of this tension is due to market mechanisms, many of which are inevitable. Nevertheless, Parliament or the Competition Council can take measures that could at least partially ease the situation.

Two Complementary Concepts

MM: Let's discuss these measures now, but I'd like to start by clarifying some competition law concepts on which any potential measures would be based. Producers often complain about retailers' behavior, citing abuse of dominant position or unfair competition. Can you tell us more about these concepts?

Adrian Șter: Certainly. Both concepts belong to the broad field of competition law, both regulate unilateral conduct, and both limit, in the sense relevant to us, the commercial freedom of the retailer.

Before addressing your question, it should be mentioned that the commercial freedom of any merchant—who they enter into commercial relationships with, under what contractual terms—is essential. This freedom should only be limited when there is no other solution to address market functionality issues, and even in such cases, the limitation should be as non-intrusive as possible, not exceeding the minimum necessary to resolve the dysfunction.

Why? It's very simple; we don't want the market economy to be dictated. Ideally, it should be as close as possible to the demand-supply mechanism. The greater the degree of intrusion into a merchant's conduct, the further we move away from the optimal market outcomes.

The two concepts you mentioned are very intuitive for any merchant. Dominant position is the position of strength held by an enterprise that allows it to act independently of the constraints exerted by suppliers, competitors, and customers. Simply holding such a position is not punishable; what is punishable is the abuse of a dominant position.

Thus, an enterprise with a dominant position is limited in the actions it can take in the market; it has certain restrictions imposed on its commercial freedom to compensate for the mentioned imbalance of power.

Technically, the existence of a dominant position is presumed starting with a market share of at least 40%. In other words, no retailer in Romania holds such a dominant position.

The second concept, unfair competition, refers to a series of actions that are not considered acceptable in a normal competitive environment. These actions are prohibited for all enterprises, regardless of their market share, such as denigrating competitors or diverting clientele, or only for enterprises that have a superior bargaining position relative to their contractual partners—abuse of superior bargaining position.

Unlike the dominant position, which is an objective concept—an enterprise either is dominant or is not, based on market share—the superior bargaining position is assessed based on each commercial relationship.

Thus, an enterprise may have a superior bargaining position concerning its relationship with one commercial partner and may not have a superior bargaining position concerning its relationship with another commercial partner. It is a much more fluid concept that requires a case-by-case analysis with many variables.

In fact, just a few days ago, the Competition Council announced the opening of the first investigation into the abuse of superior bargaining position, indicating its willingness to investigate such cases.

In addition to these basic concepts, Law 81/2022 regulates specific cases of applying unfair competition regulations in the food sector. Based on criteria related to turnover, Law 81/2022 identifies those relationships considered unbalanced from a bargaining power perspective and imposes a series of obligations on retailers in a superior bargaining position.

Specific Practices Prohibited by Law 81/2022

MM: Based on what you’ve said, it seems that Law 81/2022 could have the desired effect—most producers complain about the additional costs they have to bear, unfair commercial terms, or refusal to be listed due to the small volumes they can guarantee. However, we don't see any real impact in the market. Why?

Adrian Șter: Law 81/2022 might be a perfect example of the unintended consequences of legislative intervention. Theoretically, the provisions of Law 81/2022 could protect small producers who are in a contractual relationship with retailers by imposing a series of limitations on the commercial terms that can be included in commercial contracts.

In practice, retailers have a simple solution to avoid these limitations—they can choose not to enter into commercial relationships with those producers who, due to their small size, would fall under the protection of Law 81/2022.

This approach solves several issues for retailers: they do not need to allocate resources to relationships with more producers, they do not need to address the unavailability of products, they do not need to use multiple types of commercial contracts with different provisions, and they do not need to forgo benefits like receiving commercial and financial discounts exceeding 20%, etc.

In other words, the conditions imposed by Law 81/2022 often complicate rather than simplify the entry of retailers into commercial relationships with local producers.

MM: To apply the above concepts practically, do you think there is a distinction between not listing a producer and delisting a producer from the perspective of a retailer's conduct?

From a competition perspective, not listing a producer presents far fewer issues for a retailer. In the absence of a dominant position, which no retailer currently holds according to the Competition Council and the definition of the relevant geographic market, no retailer can be forced to enter into commercial relationships with a specific supplier; they have the right to choose their commercial partners.

Regarding delisting a producer, things are a bit more complicated. An abrupt delisting could lead to the retailer’s contractual liability if it is not done in accordance with the contractual terms, or to contraventional and even tort liability if it is done in violation of unfair competition laws.

Essentially, the Competition Council has repeatedly expressed its opposition to the abrupt, unjustified termination of a functional contractual relationship where one party has a superior bargaining position.

This is because delisting implies that at least at the beginning of the commercial relationship, there was an economic justification and mutual benefits. Thus, if a producer is delisted, there needs to be a series of justifications documenting why the relationship is no longer functional from the retailer's perspective.

In other words, I would like to see more justifications for delisting a producer than for not listing a producer.

Listing or Delisting as Part of Retailers' Commercial Freedom

MM: I understand that there are currently no legal regulations that could force retail chains to list local producers. Do you see any legislative intervention in this regard?

Adrian Șter: Generally, I am not in favor of legislative intervention to resolve market tensions because such interventions often have unintended consequences—like Law 81/2022—or risk violating EU law on the free movement of goods by favoring local products, or a combination of both.

It doesn’t help that legislative interventions are often political choices addressing specific issues under market pressure without thorough economic analysis.

Ultimately, listing or delisting is part of the retailer’s commercial freedom, and I can imagine a range of reasons why obliging a retailer to do so would be counterproductive not only for a particular commercial relationship but also for the market in general.

For example, obliging a retailer to list certain categories of local producers could raise serious questions about the integrity of the supply chain and how consumers are affected if the producer cannot sustain a consistent or safe production.

So, I would shift the paradigm from whether to force retailers to discuss the criteria they use in making this decision.

From a competition perspective, Romania has the right to regulate the unilateral conduct of companies more strictly than at the EU level. In other words, we can impose obligations on companies with significant bargaining power that are not necessarily imposed at the European level (this does not exclude the possibility that other Member States have imposed such obligations at the national level).

In this sense, I could see, for example, a requirement to justify the refusal to list or the decision to delist a product, to "make transparent," if you will, the decision-making process in this regard.

This is also being discussed in other EU Member States or the European Economic Area. Moreover, this mechanism is not new; it is an idea also used in the digital field, where large platforms may have such obligations towards merchants on the platform to compensate for the imbalance of power.

Ultimately, the producer-retailer relationship is essential for both parties. If communication on this point is ensured, we increase the chances that producers will understand why they are delisted and take measures accordingly, such as ensuring the sustainability of production.

Of course, this requirement should also be formulated appropriately to consider the legitimate commercial interests of the retailer and the necessity to protect their confidential information. For example, the justification could not include information about the profitability of the respective product compared to the profitability of other products in the category, except in a very general way.

Recommendations for Retailers and Producers

MM: In conclusion, I would like to ask for some recommendations for both retailers and producers to ease this tension.

Adrian Șter: Sure, here are my recommendations:

Recommendations for Retailers

1. Improve Communication:Transparency: Enhance communication with producers. This doesn’t require additional resources but shows good faith legally and demonstrates that a delisting or non-listing decision is objectively grounded.Justifications: Producers should know why their products were delisted or not listed, as long as no contractual terms were violated. A proper communication beyond a mere statement like ‘the decision was based on objective economic reasons’ can defuse tension, educate both parties about each other's difficulties, and ultimately stimulate more efficient, sustainable, and safe production.
2. Transparency: Enhance communication with producers. This doesn’t require additional resources but shows good faith legally and demonstrates that a delisting or non-listing decision is objectively grounded.
3. Justifications: Producers should know why their products were delisted or not listed, as long as no contractual terms were violated. A proper communication beyond a mere statement like ‘the decision was based on objective economic reasons’ can defuse tension, educate both parties about each other's difficulties, and ultimately stimulate more efficient, sustainable, and safe production.
4. Implement Internal Procedures:Standardized Criteria: Adopt internal procedures for listing or delisting products that can be applied to all products and can be provided to relevant authorities in case of legal disputes. These procedures could include factors like profitability, availability, etc., and should be applied uniformly to demonstrate objective and non-discriminatory practices.Documented Justifications: Develop a structured approach to document and justify decisions to ensure transparency and compliance with legal requirements.
5. Standardized Criteria: Adopt internal procedures for listing or delisting products that can be applied to all products and can be provided to relevant authorities in case of legal disputes. These procedures could include factors like profitability, availability, etc., and should be applied uniformly to demonstrate objective and non-discriminatory practices.
6. Documented Justifications: Develop a structured approach to document and justify decisions to ensure transparency and compliance with legal requirements.

Recommendations for Producers

1. Form Associations:Collective Bargaining: Producers should consider forming associations. Such associations can be stronger negotiating partners for retailers and better meet retailers' requirements, increasing the chances of their members’ products being listed.Efficiency and Funding: Associations can also bring economic and technical efficiencies and make it easier to obtain EU funds for development and investment. However, forming such associations involves risks of agreements between (potential) competitors, so seeking specialized advice is recommended.
2. Collective Bargaining: Producers should consider forming associations. Such associations can be stronger negotiating partners for retailers and better meet retailers' requirements, increasing the chances of their members’ products being listed.
3. Efficiency and Funding: Associations can also bring economic and technical efficiencies and make it easier to obtain EU funds for development and investment. However, forming such associations involves risks of agreements between (potential) competitors, so seeking specialized advice is recommended.
4. Seek Specialized Legal Advice:Escalating Disputes: In case of refusal for product listing or delisting, if producers wish to escalate the dispute to the Competition Council or court, they should obtain specialized legal advice to have a realistic evaluation of the steps to follow and the chances of success.Relevant Arguments: Ensure that the arguments presented are relevant from a competition law perspective and are interpreted correctly, avoiding irrelevant or incorrectly interpreted details that do not align with legal provisions.
5. Escalating Disputes: In case of refusal for product listing or delisting, if producers wish to escalate the dispute to the Competition Council or court, they should obtain specialized legal advice to have a realistic evaluation of the steps to follow and the chances of success.
6. Relevant Arguments: Ensure that the arguments presented are relevant from a competition law perspective and are interpreted correctly, avoiding irrelevant or incorrectly interpreted details that do not align with legal provisions.

MM: Thank you for your time and insights!

Adrian Șter: It was my pleasure!

About Adrian Șter

Adrian Șter is recognized as one of Romania’s leading experts in competition law and state aid. He is a graduate of the Faculty of Law (UBB), Nottingham University's School of Law, and holds a master’s degree from University College London. Over his 18+ year career, Adrian has been involved in some of the most significant cases both in the Romanian and regional markets.

Before founding 360Competition, Adrian was the partner responsible for the competition and state aid department at D&B David si Baias and the competition department at Wolf Theiss. He has provided legal assistance in cartel matters, mergers, vertical agreements, competition litigation, and abuse of dominant position for clients in various economic and industrial sectors, including oil and gas, food, transportation, telecommunications, pharma, FMCG, retail, financial-banking, automotive, media, agriculture, and construction. Adrian is recommended and recognized in Chambers and Partners, Who's Who Legal, Legal 500, and other rankings as one of Romania's top competition experts.