Saturday, September 09, 2000

Wal-Mart's low prices too low for Germany's retail regulators

The Associated Press

        BERLIN — Wal-Mart's “Always Low Prices” were too low for strict German regulators, who ordered the U.S. giant and two German rivals Friday to call off their price war on groceries — because it could drive mom-and-pop shops out of business.

        The German Cartel Office found that Wal-Mart — along with the Aldi and Lidl discount supermarket chains — were selling staples such as milk, butter, flour and cooking oil below cost on a regular basis, a practice that is illegal in the highly regulated world of German retailing.

        If allowed to continue, such a policy could push smaller stores out of business, clearing the way for the big guys to raise prices in the future, office president Ulf Boege said.

        “The material benefit (of below-cost pricing) to consumers is marginal and temporary, but the restriction of competition by plac ing unfair obstacles before medium-sized retailers is clear and lasting,” he said.

        Not everyone shopping at Berlin's freshly remodeled Wal-Mart superstore was happy to have the government looking out for their long-term interests, though.

        “Life in Germany is expensive enough as it is,” said Franz Roth, a 52-year-old locksmith buying the weekly groceries with his wife, Gabi. “When the likes of Wal-Mart come along and force the others to pull down their prices, that's a good thing.”

        Smaller shops have it tough, they conceded, but blamed the tax man for forcing them to pinch pennies.

        “It's the government's own fault,” Mrs. Roth said. “They take so much from us in things like gas tax that everyone has to look out for themselves.”

        Wal-Mart, which has been working to establish a foothold in Europe's largest market, said in a statement from its German head quarters that it would “orient” its pricing to comply with the law.

        “However, we still remain committed to lowering the cost of living in Germany by offering our customers the best quality products at the lowest possible prices,” it said.

        Aldi and Lidl had no immediate comment.

        At a news conference in Bonn, Mr. Boege said he had given notice to the three companies Thursday and threatened them with fines of up to 1 million marks ($445,000) for noncompliance.

        He said he was not interested in setting up “protective fences” for small stores.

        “To me, it's more about seeing that independent companies are not pushed out through the unjust pricing strategy of big companies with superior market strength,” he said.

        The German Retail Trade Association greeted the decision as a “hopeful signal for the end of the ruinous cutthroat competition.”


Delta gets you there, but slowly
Delta pilots want contract
Federated could dump Fingerhut
Something to bark about
Euro slide continues
Relief in price of oil unlikely
Business Digest
Citigroup purchase reveals big lender
Earnings warnings put damper on stocks
Firestone or not, tires scarce
HIGGINS: The big picture
Mitsubishi shake-up sends old management packing
Savvy strategies
The Sophisticated Investor
- Wal-Mart's low prices too low for Germany's retail regulators
Your 401(k) not OK? Speak up
Tristate Business Summary
What's the Buzz?