Retailers and wholesalers are increasingly concerned about how major fast-moving consumer goods (FMCG) producers fully exploit the EU Single Market from a production standpoint but completely deny it from a sales perspective, leaving European consumers to pay a high price, says Christel Delberghe, CEO of EuroCommerce, attempting to address the question posed in the title of the organization's published analysis.

After 30 years

Last year, the European Union celebrated the 30th anniversary of the single market, and although many achievements have been made, there are still significant flaws to be remedied. One of the most striking is how a few major FMCG producers have effectively obstructed the single market for decades.

In a properly functioning single market, retailers and wholesalers could arbitrate on behalf of consumers. This could be either by sourcing from the markets where FMCG producers sell at the best prices and/or by centrally sourcing for their stores in different member states.

However, producers go to great lengths to prevent this. They do so by imposing Territorial Supply Constraints (TSC), and a 2020 study by the European Commission estimated that the resulting loss of consumer welfare was €14 billion annually - at least.

Geoblocking Regulation

Interestingly, the European Union addressed B2C (Business-to-Consumer) TSCs in 2018 through the Geoblocking Regulation. This practically banned practices used by online sellers that resulted in denying access to websites from other member states.

The Geoblocking Regulation leaves traders free to set different prices on websites targeting different customer groups and to define to whom they deliver. While the Geoblocking Regulation does not create an obligation for traders to sell, it prohibits traders from discriminating based on the nationality, residence, or registered office of the customer when selling.

Therefore, a customer from Belgium who wants to arbitrate better prices on the French or Dutch website of the respective trader cannot be blocked from ordering.

Contractual freedom remains, subject to compliance with nondiscrimination rules. We wonder why the same nondiscrimination principle does not apply to business-to-business relationships.

Most benefit

Most FMCG producers fully benefit from the single market by producing identical goods on a large scale and at the lowest cost at just one or two production units in the European Union. Regardless, they impose the obligation on retailers to source in every country they operate in for local resale at often significantly different supply prices.

Claiming that TSCs are inevitable due to different labeling rules, languages, varying consumer preferences, and so on, is simply a smokescreen. Retailers and wholesalers also deal with major private label (store brand) producers, which they often sell under their supermarket's own name.

For these producers, central sourcing for different national markets in the EU is not an issue. They simply use the same specifications, uniform packaging, and labeling in multiple languages wherever possible.

Where local adjustments are necessary, they are simply made, and if these result in different costs, they are easily explained.

The European Union should finally rise and prevent FMCG producers from being the only ones able to enjoy the single market, fragmenting it nonetheless to the detriment of retailers and wholesalers and ultimately European consumers.

In the end, this is simply a matter of fairness. After 30 years, it's time for a better recipe!