Jan Werner
Author: Jan Werner

Dual Quality Products in Single Market: What’s next?

26 April 2018
EPP Event at the European Parliament April 25, 2018

At the event on April 25, 2018 "Dual quality products in single market: What’s Next?" hosted by MEPs Prof. Dr. Inese Vaidere and Ivan Štefanec, our Head of Legal International, Jan Werner made the following contribution on behalf of METRO AG.

Hearing EPP Dual Quality Products, 25 April 2018

Dear Members of Parliament,
dear Members of the Commission, Ladies and Gentleman,

thank you for having invited me to this debate on alleged “dual quality”.

We are disappointed that a proposal for an amendment of the UCPD has been made, although the discussion on this topic is ongoing. The JRC has not finished its work, and barring facts the proposal is based mostly only upon personal perceptions, and in our view populistic allegations. This approach is not in line with the target of “better regulation”.

The Commission Notice of the EU Commission of end of September looked quite a bit into the details of why there can be different specifications for products.

Differences are not per se a sign of different quality

Reasons for different specifications can be:

  • different local ingredients/availability
  • different local taste
  • sometimes local food laws differ and make it impossible to sell identical products. The well known "fish stick” case is directly a result of an applicable law in Germany!
  • and sometimes purchasing power, respectively the willingness of people to pay for a product a certain price. You can see this in Germany, where consumers want to spend less money on food than French consumers.

To be clear: I do not speak about products like “Butter Cookies” without butter. Products must have correct information and packaging, but the ingredients may be different in different countries.

There are many examples which show that it is quite difficult to assess what product has a “better quality”

  • frozen Pizza is sold in Germany with more vegetables on the Pizza than in Italy. Italians like their Pizza with less ingredients, German customers demand more. What is the better Pizza?
  • Tuborg beer is sold in Denmark with 4,5% alcohol. In Romania it is 5% alcohol. What is the better beer?
  • A Czech study alleged that Persil washing powder contains in CZ less “active washing ingredients”. Henkel has responded to this and stated that customers in CZ e.g. wash with higher temperature than German customers, and that the quality of its products cannot be measured only by one ingredient. A study showed that the end result – clean clothes – was identical
  • Coca Cola in Hungary is using sugar from Corn. Hungary has complained about this, as in Germany the sugar is from sugar beets. Coca Cola has responded and stated that its original recipe from the US is with sugar from Corn. So – who is now being treated better – the Germans or even the Hungarians who get the “original” recipe?
  • coffee taste in the world is extremely different. Some people like coffee stronger, some weaker. Eastern Europeans are known to prefer coffee with a higher amount of Arabica. So Germans get coffee with less Arabica. Are they being mistreated? Nescafe is selling its dry coffee throughout the world under the same brand, but with 32 different recipes. Is any consumer mistreated? Certainly not.

And: what is identical? Packaging will always be in local language, indicating it is made for that market. What is the “product of reference”? Who should have the right to decide on this?

Jan Werner, METRO AG

Traders and Manufacturers have the intention to serve their customers the best. There is no uniformity in taste in the European Union, and it should not be the target of the Commission to force a uniform taste upon its citizens. This is not about “second class citizens”, this is about taking the interests of EU Citizens into account!

Regulation will make innovation harder

Retailers and manufacturers always try to improve products – this is done through trial and error. Product changes may work well in one country, but then meet resistance in another country. The result is differentiation in composition – not quality. BEUC has complained about alleged product deterioration as a consequence of changes – we understand this, but still: products must be allowed to change. Interfering with free market in this regard will harm innovation.

And who should be in the position to judge whether a product has better or worse quality? One allegation circled around whether sodas contain real sugar or artificial sweeteners. Considering obesity – is having “real sugar” a better quality? Is it right to have governmental authorities comparing products?

We have millions of products in trade on the shelves, developing, changing, being introduced, failing, being successful. Such products are developed considering a balance of price and quality.

If at all, it must be the consumer who decides when he or she does not like a product

A non-profit consumer organization like “Stiftung Warentest” in Germany offering consumers information about products is the right place to assist consumers – in the end still it is the consumers who should and will decide.

The average consumer – and this is the consumer the UCPD intends to protect - in the end compares the product he or she buys with the other products on the shelf in their country. Only where a product states “original recipe”, or “mothers recipe” he or she may have an expectation that this will be the same recipe as in other countries. Also, in rare cases like real global brands one may have taste experiences from other countries. These rare cases are not sufficient to push for uniform taste and recipe.

This is not an East/West issue

Swiss chocolate is known to be very good, but pricey. Lindt is selling chocolate in many countries of the world. Will in Germany customers pay 3 Euro for a chocolate? Obviously not. So Lindt chocolate in Germany will be adapted to German chocolate taste and price expectation. The consumer does not care whether the Swiss customers may get even better chocolate at a higher price.

Aldi and Lidl just recently started a campaign in Germany putting own brand and A-brand products side by side, asking the customer to compare. This is what is happening. The consumer does not compare to other countries. The discussion on “Dual Quality” consequently totally disregards how consumers make a choice.

The proposal has also the result of harmonizing taste

Marketing a product with a “different” brand would always remain possible, so there would not be a benefit to consumers, if that would be the reaction of manufacturers. However, manufacturers cannot afford a multiplication of registered trademarks. Effectively, the result is EU wide harmonization. Ferrero recently as result of discussions changed the recipe for Nutella in Germany. Now consumers in Germany are complaining about the recipe, as they feel their product does not meet their expectation any more. There was no change for consumers in other countries.

There are other barriers in the Single Market depriving in the end consumers from having access in their country to products from other countries

We as traders would always be happy to fulfill consumer wishes, to the extent they really exist. And we would know. If as alleged products in Germany are better and cheaper, then the EU should make sure that traders can buy products in Germany to ship them to other countries. This is today prevented by Territorial Supply Constraints, by the actions of Manufacturers who do not sell to Retailers for resale in other countries. THIS is a barrier, this deprives in the end consumers from having access in their country to products from other countries.

Having a provision on alleged “dual quality” as part of the UCPD is accordingly in our view bad regulation. The latest draft amendment of Art. 6 (2) UCPD does not even mention the fair reasons for different compositions mentioned in the Commission Guidance of September 2017. It is ill conceived and open for misuse by authorities who put their taste expectations in place of real customer expectations.

This proposal on alleged dual quality is against the interest of European Consumers.

Thank you very much for your attention.