Abstract
In this chapter we examine the European Food Prices Monitoring Tool as a case study to improve price transparency and, as a result, competitiveness in the European food system. We first analyze the relation between price transparency and fair competition from a theoretical point of view. We then investigate agricultural and food prices evolution in the EU over the last decade, with a specific focus on the price transmission along the food supply chain. We follow with an assessment of the rationale for the price monitoring tool and analyze its functioning as a case study. We conclude with a few comments on how this tool can contribute to fair competition through an increase in price transparency.
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Notes
- 1.
The profit sacrifice test, also known as the no economic sense test, states that firms should not engage in activities that irrationally results in a loss of profits or that make no economic sense, except for a tendency to eliminate or lessen competition. The equally efficient firm test states that firms should not engage in activities that exclude rivals who are as efficient as the firm in question.
- 2.
However, a high price transparency would also increase the “one-time” benefit of deviating from the agreed cartel price; the net effect would depend on the specific characteristics of the market and the cartel.
- 3.
Notably those are characterized by: “low levels of concentration; large number of sellers; low barriers to entry; low transparency as to prices, quantities transacted and marketing strategies; asymmetries among sellers and product offerings; rapidly changing demand and cost conditions; lumpy purchasing patterns; and the presence of one or more maverick competitors” (OECD 2001).
- 4.
Between the end of 2010 and the beginning of 2011, the last available data at the time the authors are writing, agricultural price levels are increasing at the peak reached during the 2007–2008 crisis.
- 5.
This evolution finds additional grounding at the time this chapter has been finalized: a recent article on the Financial Times illustrates the outcome of a global survey conducted by Grant Thornton on 11,000 food producers across 39 countries, showing that 41% of the respondents will increase their prices in the following 12 months (Lucas 2011).
- 6.
The “incompleteness” of the internal market refers to the degree of barriers to the free cross-border flow of goods, services, capital, and people (Ilzkovitz et al. 2007).
- 7.
See Eurostat homepage online at http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/
- 8.
For example, in the case of water demand, Gaudin (2006) shows that when consumers are given information about the price of water on their water bills, their price elasticity for water increases by 30%.
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Acknowledgment
This chapter was prepared under the framework of the Transparent_Food (Quality and Integrity in Food: A Challenge for Chain Communication and Transparency Research) project. Transparent_Food is an integrated project financed by the European Commission under the 7th Framework Programme (FP7/2007-2013, grant agreement no. 24500). The information in this document reflects only the authors’ views and the Community is not liable for any use that may be made of the information contained therein. The authors are grateful for the consortium members for their contributions.
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Molnár, A., Van Lembergen, K., Tarantini, F., Heene, A., Gellynck, X. (2013). Price Transparency as a Prerequisite for Fair Competition: The Case of the European Food Prices Monitoring Tool. In: James, Jr., H. (eds) The Ethics and Economics of Agrifood Competition. The International Library of Environmental, Agricultural and Food Ethics, vol 20. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-6274-9_13
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