Georgian Competition
and Consumer
Agency

Competition Agency of Georgia, following the Law of Georgia on Competition, has discussed and issued a relevant recommendation on the problematic issues between distribution companies and retail chains.

In the frame of the monitoring, the Agency should have identified the problematic circumstances of whether Article 6 (Abuse of Dominant Position) and Article 7 (Restrictive Agreements, Decisions, and Concerted Practices) could be included in the prohibited actions.

-- Data from 73 distribution companies and 16 chain stores (contracts, total turnover 2018-2019, number and volume of branches, range of products for sale) were studied.

The Agency has defined, the wholesale market used by retail stores for trade, as a relevant market to conduct the study, which includes both chain and independent stores around Georgia.

The study outlined that in 2019 the total market share of retail chain stores was 31%, and the market share of the rest of the traders - 69%. It was separately assessed the Tbilisi market as well, where the market share of retail trade was 45.5% and the market share of the rest of the traders – 59.5%. It should be noted the growing dynamic of the market share of the chain stores over recent years.

-- According to the Agency, there was not identified any particular retail chain store with a dominant condition on the market, as well as with group dominance. Consequently, the problems sat by the parties may not be caused by the abuse of a dominant position (Article 6 of the law).

-- Based on the processing of information provided by retail chain stores to the Agency, It was revealed that "Sun Stores" LTD (28 cities) and "S Market" (23 cities) were represented in most cities over the country, herewith, it should be noted that they are specific economic agents operating with markets at the petrol stations. There is "Ori Nabiji" LTD (28 cities) which was represented in most cities of Georgia and JSC "Goodwill" in the fewest cities. As well as "Ori Nabiji" LTD (207 branches) was in the first place by the number of branches around the country and “Goodwill” JSC (10 branches) with the fewest number of branches. The leader by production assortment is the “Majid Al Futtaim Hypermarket" LTD on the market and by the last position "S Market" LTD.

-- The second problematic issue was related to the clauses in various contracts - "about the lowest supply price." As the problem was explained by the agency, it was a promise between the stores operating under one particular trade chain and it was not related to other chain stores (competitors). Therefore, this issue was not considered as a violation of the Law of Georgia on Competition (Article 7 of the law).

“During the monitoring process, the relevant EU directives and the experience of different countries were studied. Based on international practice, it was confirmed that similar problems were faced in the following countries such as Lithuania, Poland, Romania, Japan, and nor these countries, have been resolved these issues by the Competition legislation. Consequently, Competition Agency of Georgia considered it useful and issued a recommendation to start the preparation of a legislative initiative to pass the legal norms for protecting the rights of weaker players on the retail market.” – Chairman of the Competition Agency of Georgia, Irakli Lekvinadze.

Let me remind you, that the "Monitoring of Retail Chain Stores Market" has started on the base of the submission of Beka Natsvlishvili, Member of Parliament, and Georgian Business Distributors Association.