Under the proposed amendment to the Act on significant market power now before parliament, Agrofert’s negotiating power as a supplier would no longer be taken into account by the regulator when assessing the behaviour of retail chains.



Never mind Marie Antoinette's cake. Let them eat Agrofert's párky in Agrofert's rohlíky!

Imagine a meeting between the country’s largest retail chains and its largest supplier of fresh white bread rolls or 'rohlíky'. Then imagine a meeting between the retail chains and the chairman of parliament’s agriculture committee to discuss legislation to regulate abuse of market power by retailers and suppliers. Now imagine that the supplier of the rolls and the committee chairman are one and the same person. And that his committee has just approved an amendment which removes suppliers from the scope of the law.

Then imagine that this amendment is stuck onto an unrelated piece of legislation and tabled by a member of parliament at the last minute, thereby avoiding the need for discussion with either the government or with those affected by the change in the law. And then imagine that the chairman of the committee downplays the amendment, which benefits suppliers such as his own at the expense of retailers, as a ‘technical detail’.

And now stop imagining and be aware of the fact that all of the above has already happened. The much disputed amendment to the Act on food will receive its third reading in parliament this week. The hysterical bun fight between hygienists and food inspectors over who will have the right to inspect the nation’s cafeterias in future has helped distract attention from a miniscule amendment tabled by a member of parliament and surreptitiously stuck onto the amendment to the Act on food.*

With clinical precision the ‘přílepek’, as it is known among law makers, seeks to remove just three words from the Act on significant market power of retailers and suppliers (SMP). It would strike out the word ‘supplier’ from the law, meaning that in future the market power of the supplier would not be considered relevant to an assessment of the market power of retail chains. The SMP amendment also proposes to remove the word ‘repeatedly’ from the law as well. This would make it possible for the competition authorities to prosecute the first instance of abuse. A pattern of abusive behaviour would not need to be established. And the amendment would remove the word ‘significant’ from the law, making it possible for the competition authorities to prosecute all abuses rather than abuses that amount to a significant disruption to competition.

In short, if the SMP amendment is passed, the competition regulator will no longer have to prove a repeated offence, nor will it have to prove significant market distortion, and nor will it be required to consider the market power of suppliers.

As a major supplier to retail chains, the SMP amendment matters to Agrofert. Indeed, it is a gift to the finance minister's firm from the agriculture committee of the Chamber of Deputies. Jaroslav Faltýnek, who of course sits on the supervisory board of Agrofert Holding and is chairman of the agriculture committee, tried to downplay the amendment last week, describing it as a 'technical detail'. In an obvious attempt to distance ANO from a decision of the agriculture committee that would advantage Agrofert, he claimed that Michal Hašek of ČSSD was behind the whole thing. See here.

It is a gift because, in the view of the competition office, Agrofert’s market power in some areas threatens competition. Its share of the market for industrial fertilisers, meat and milk is sufficiently great to warrant regulatory attention, but its share of the market for bread is so big as to require investigation by law.

Two years ago, the regulator launched such an investigation into Agrofert’s share of the markets for fresh bread and rolls. It concluded that Agrofert’s share in both was a serious threat to competition; that consumers could be harmed by price increases; and that retail chains are not sufficiently strong to counter Agrofert’s market power. As a result, and much to Andrej Babiš’s fury, Agrofert was obliged to sell off some of its bakeries in order to win regulatory approval for its merger with a competitor called Euro Bakeries.

Agrofert is a conglomerate. Its negotiating power stems from its potential to exploit its dominance in the market for bread rolls by obliging retail chains to buy other products from Agrofert in areas where it is less powerful, such as processed meat. In other words, if a retail chain refuses to take Agrofert's hotdogs, Agrofert can threaten to stop supplying it with rohlíky. And what good is a párek without a rohlík? Under the proposed amendment to the law on significant market power now awaiting approval in parliament, Agrofert’s negotiating power as a supplier would no longer be taken into account by the regulator when assessing the behaviour of retail chains.

You do not need to be a fan of Kaufland or Tesco to accept that this is extremely one-sided and possibly harmful to consumers. And given the commercial interests of the chairman of the agricultural committee, you do not need to be a political scientist to understand that this is an outright abuse of ANO's political power.

But the SMP amendment will pass nevertheless**. This is because it enjoys the full support of ANO's new best friend in parliament, KSČM. How ironic that the parliamentary representatives of the working classes will help ANO push through an amendment to a law that will make it easier for Agrofert to increase the price of bread rolls.

Never mind Marie Antoinette's cake. Let them eat Agrofert's párky in Agrofert's rohlíky instead!


*See here for the proposed amendment to the Act on significant market power. And here for the Act itself.


** Last night (Wednesday 14th May), parliament rejected the SMP amendment. 73 MPs supported the SMP amendment out of 151 MPs present, so it was rejected by just six votes. Those who voted for the amendment included all ANO 2011 MPs present (apart from Ivan Pilny, who voted against); all KSCM MPs present, and Tomio Okamura. As I said, KSCM is ANO 2011’s new best friend.