Johan Johannson, NorgesGruppen | Harsh accusations of abuse of power against the food family that owns Meny and Kiwi

They cut down manufacturers and get 15% cheaper purchases than their competitors. They put the profits in their pockets, and this is how the Johansson family has become a billionaire by selling you your food.

This is the core of the new accusations against Norgesgruppen. Critics are in line after the Norwegian Competition Authority has once again determined that Norgesgruppen can buy food much cheaper than its competitors.

“Illegal,” say the competitors. “The Norwegian Competition Authority has only verified 16 of our 1,000 suppliers,” says Norgesgruppen.

The key questions are whether the price difference between the 16 suppliers surveyed provides a picture of the entire industry and what means Norgesgruppen uses to obtain better terms than its competitors.

– Differences in purchase prices are not necessarily in conflict with the Competition Law, since the Law does not establish a general prohibition against price discrimination. A concrete evaluation must be carried out. But price discrimination that restricts competition to the detriment of consumers may be a violation of Competition Law, says Sigurd Birkeland, who leads the Norwegian Competition Authority project for groceries.

The Norwegian Competition Authority survey shows that 7 of the suppliers have given Norgesgruppen even better terms in the past year, while eight have narrowed the gap somewhat.

In the 2017 report, the Norwegian Competition Authority says they have examined the prices of ten strong brand suppliers: Tine, Orkla, Nortura, Ringnes, Coca-Cola, Mondelez, Mills, Scandza, Nestlé and Mars. They have been selected due to their high turnover and strong brands, and what they have in common is that they deliver exactly the same products that are sold to Norgesgruppen, Coop and Rema.

The first report already documented large price differences. One in four suppliers gave Norgesgruppen products at least 15% cheaper.

The difference has a great impact because the volume is so high. According to Statistics Norway, the grocery trade increased by 15.8 percent from last year to this year, and the industry has a turnover of more than NOK 210 billion a year.

Chains compete a lot on consumer price, so purchase prices mean a lot to profitability and competitiveness. In the last year alone, Johan Johannson has made himself four billion crowns, according to the Capital 400 list.

Therefore, it is indisputable that the food billionaire family puts part of the benefit of good purchasing conditions in their own pocket. On the other hand, it is not illegal to be better at negotiating than the competition.

So what should the Minister of Commerce and Industry do?

One possible way forward is to ban suppliers from discriminating against food chains, as both Kolonial.no and Rema have proposed. Norgesgruppen has made Oslo Economics take notice against such a ban because it will allegedly harm consumers.

The Ministry of Commerce and Industry, for its part, has hired Menon Economics to investigate why there are such large purchasing differences, and they warn against taking radical political measures because the uncertainty is so great.

The preliminary conclusion is that it is not known why NorgesGruppen has better purchase prices. In theory it could be due to market power due to size, but it could also be due to better distributors.

What we do know, however, is that the hundreds of millions of crowns in potential savings on purchases do not benefit customers, as prices are the same between chains. You don’t need a Ph.D. in economics to understand where some of this hidden gain is going.

P.S! What do you mean? Is it okay for NorgesGruppen to negotiate or push for better terms, or should suppliers be pressured to give equal terms to all food chains? Write a reader letter!