The Croatian Competition Agency (CCA) has addressed recent media misconceptions regarding the implications of retailers selling food below the price they paid to suppliers. This practice, while seemingly beneficial for consumers, poses significant risks to the entire food supply chain, affecting everyone from small producers to end consumers.

While the CCA acknowledges that discounts are a common retail practice, it emphasizes that combining these discounts with other promotional strategies must not violate legal provisions, particularly the prohibition against selling products below their purchase price. This situation often arises when large retailers apply multiple discounts on already reduced items, leading to sales at a loss.

At first glance, lower prices may seem advantageous for consumers. However, this practice can create undue pressure on producers, especially small family farms, to lower their prices to maintain shelf space in large retail chains. Consequently, producers may resort to cost-cutting measures, such as using inferior ingredients or reducing staff, to comply with these demands.

Small retailers are also adversely affected, as they lack the financial resources to compete with the deep discounts offered by larger chains. This disparity can lead to the closure of smaller shops, reducing consumer choice and ultimately resulting in higher prices in the long run.

As large retailers eliminate competition, they gain the power to raise prices and limit discounts, leaving consumers with fewer options. This trend threatens local food production, as many producers may abandon their businesses due to unsustainable losses, further diminishing access to domestically produced food.

For instance, if a supermarket sells milk at €0.60 per liter while purchasing it for €0.70, the retailer may pressure the producer to lower their price in future transactions. If the producer refuses, they risk being removed from the supply chain, while agreeing to the price cut could compromise product quality and sustainability.

The CCA highlights that this issue harms small producers, small retailers, consumers, and society as a whole, as local food production becomes increasingly unsustainable. The Act on the prohibition of unfair trading practices in the business-to-business food supply chain, along with EU regulations, aims to prevent such practices to ensure fair competition and protect small producers.