UK consumers lose out in EU household goods price riddle
(The Times, Saturday 18th May 2002)
LEADING manufacturers of household brands are carving up the European market and pricing their goods differently in EU member states. A report on
Europe’s internal market shows huge variations in the cost of everyday grocery products, suggesting that some companies may be operating
discriminatory pricing policies.
The European Commission’s Internal Market Scoreboard reveals that Heinz tomato ketchup costs more than twice as much in Italy
as in Germany, while shoppers in the UK must pay 70 per cent more for a tube of Colgate toothpaste than consumers in Spain or Portugal.
The report indicates that no single factor accounts for the discrepancies. VAT and distribution costs play a part and the report suggests that lack of price
convergence is thwarting the EU’s efforts to level the playing field. “Some producers exploit market fragmentation by operating different pricing
policies in different national markets.”
No country is consistently cheaper than another but the report indicates that Sweden is the dearest place to shop for groceries, while Spain is the
cheapest. However, levels of income are not a good indicator: The Netherlands and Germany, both high income economies, have the second and third
most inexpensive shopping baskets, respectively, among the 15 European states. Meanwhile, Portugal, which has below average incomes, has average
prices. The UK, excluding the effect of VAT, is the second most expensive place to shop for groceries.
Transport costs and cultural differences can explain some discrepancies but it is difficult to justify why Coca-Cola should cost almost twice as much in
Denmark as in Germany, or why Nivea shaving foam is 80 per cent more expensive in Britain than in France.
Hypermarkets help to bring down prices, says the Commission, playing a big role in lowering prices in Spain and Germany. However, Italy, which is
dominated by small shops, is far from being expensive, ranking below average and broadly in line with Belgian, Austrian and French prices.
The scoreboard shows that price differences within a state can be as much as six times smaller than between states. The price of ketchup varies by just
2 per cent within a country, but across Europe the disparity is 19 per cent. And some variations are counterintuitive. Denmark, a major dairy producer,
is the most expensive country to buy butter, while Germany is cheapest if you want a frozen pizza.
The EU has no power to order price convergence. However, a spokesman for the Commission explained that it can act if a retailer is refused access to
better prices for goods sold by the same manufacturer in another EU state. “We have fined Volkswagen for refusing to supply right-hand drive cars
outside of the UK,” he said.
The scoreboard also names and shames those states that are failing to implement the EU’s single market directives. France is at the top of the list,
having failed to put into effect more than 3 per cent of the Commission’s internal market legislation.
France is also the main offender in failing to apply the single market rules, with 205 infringement proceedings outstanding. France and Italy together
account for 30 per cent of the Commission’s outstanding actions but the UK is increasingly an offender with 105 cases of infringement, up 42 per cent
from last year.
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