Every year, trade negotiations highlight the tensions between large retailers and their suppliers, and the authorities are regularly called upon to intervene to restore balance to these relationships. In this context, central purchasing organisations – which enable several retailers to negotiate collectively with their suppliers whilst continuing to compete for sales to consumers – are likely to strengthen retailers’ bargaining power.
There have been two waves of buying group formation in France, in 2014 and 2018, and the law has evolved to allow them to be regulated by the Competition Authority. Following a brief overview of the economic forces at play, based on a review of the literature, we present the results of two studies carried out by the authors of this note. The first study empirically examines the effects of the creation of purchasing groups in France in 2014 within the bottled water sector. It shows that the purchasing groups altered the distribution of profits to the detriment of suppliers, but that they also led to a fall in prices that benefited consumers. The second study discusses the effectiveness of excluding private-label brands from the scope of purchasing groups, a measure recommended by the competition authorities to protect small suppliers and maintain the diversity of supply.
