1.5 The first order effect of a buying group is to lower end prices for customers. This is because:
a. buying groups only concentrate reseller power in procurement – this doesn’t reduce competitive tension in the negotiation (in fact, it increases the pressure on suppliers to offer the best terms) and it doesn’t reduce competition tension between resellers, who continue to compete against each other downstream;
b. retailers’ and wholesalers’ incentives to use their buyer power in procurement are fundamentally aligned with the interests of customers and end consumers – who also want retailers and wholesalers to obtain the lowest input prices; and
c. because buying groups do not concentrate competition in the downstream retail and wholesale markets, retailers and wholesalers who gain a stronger bargaining position continue to have strong incentives to share terms improvements with their customers.
1.6 It is therefore fundamentally misleading to characterise buying groups as similar in their effects to other forms of horizontal concentration – the economic effects are fundamentally different. They are pro-customer and pro-consumer by default.
1.7 There are, in theory, circumstances where buying groups can be harmful to competition in the upstream or downstream markets. This arises when the concentration of buyer power is so great as to give buying group members the power to exclude competition – either by foreclosing other market participants, or by facilitating coordination.
1.8 However, such exceptional circumstances already sit fully within the ambit of existing EU competition law provisions – designed to prohibit exactly these types of horizontal concentration. There can be no credible suggestion of an enforcement gap in EU competition law, precisely because buying groups remain pro customer and pro-consumer at levels of horizontal concentration significantly above the threshold at which EU competition law would already intervene in other circumstances.