The deep roots of the Kaufland case

Kaufland was fined for "abusing significant market power in the market" - but the absurdity of this fine points to the much more serious roots of the whole problem: we are killing our own future with similar steps.

Kaufland was fined. For what? For paying for deliveries ...
Kaufland was fined. For what? For paying for deliveries ...

String Kaufland got a fine. For what? That it would be for expired meat? Low-quality food? Theft? No.

Kaufland agreed with suppliers on payment deadlines for deliveries that were longer than 30 days. Both the customer (Kaufland) and the suppliers agreed to this deadline and Kaufland complied with the agreed deadlines. So he got fined for it. For paying for deliveries.

Does it sound absurd to you? Definitely me.

The Antimonopoly Office claims that Kaufland is abusing its "significant market power". According to Food chambers it is a confirmation of the existence of "distorted supplier-customer relationships".

Market power

Where does the "market power" of the Kaufland chain come from?

Market power is basically a picture of profit. How is a profit made? So that someone considers yours service useful and willing to pay for them - and your costs are lower.

Kaufland's profit came from the voluntary decisions of many customers. It is not black magic and the evil of the devil that create profit, and therefore market power, but the judgment of customers. Kaufland offers services and offers them obviously well. That's why he makes a profit. And that's why it has market power.

"Significant market power" is thus an admirable thing, if it was obtained on the market through a voluntary exchange. Why? Because it is a sign that many people have voluntarily chosen that the incredible competition of infinity of goods and services is Kaufland is the best deal for their money.

Kaufland could not force its sales (such as the state), it did not stand with a pistol in the hands of its customers. No, Kaufland its customers convinced by the quality and price of his services to bring him voluntarily came and voluntarily they exchanged their money with him.

Kaufland is not to blame. If you don't like that profit, complain about it customers. They themselves decided to make that profit.

Real prices

How is it that Kaufland is "so good" in providing services that it makes a profit? One of the methods used by Kaufland is to negotiate with suppliers longer payment periods for deliveries.

Kaufland can thus purchase nominally more expensive products and sell them at nominally lower prices than other chains - longer maturities reduce the real price, which de facto increases real money income.

Suppliers then live in a world of "higher risk". They do not have to reduce their nominal prices - they sell products "all the same", they just wait for the money for a longer time. Although the nominal profit is the same, the real profit is lower.

If suppliers want to raise their money sooner, there is nothing easier than lowering real prices - reduce nominal prices or supply higher quality products at the same prices. In other words, it is the work of suppliers streamline production, to be "better than others".

And who would make money on it? Who else but the customer, as before. And through competition, we all in our role as consumers.

Clerk and hard work

Who could complain to Kaufland about the voluntary agreement?

It could be a competing retail chain or just one of the suppliers who was dissatisfied with those due dates.

If the state did not interfere in voluntary agreements, in the absence of an antitrust authority, a competitive retail chain would be forced to streamline and improve its customer serviceto be able to compete with Kaufland.

Dissatisfied supplier he could then either refuse to cooperate further with Kaufland or, under pressure from competitors who would like to push himself in his place in the event of the original supplier leaving, he would have to improve your offer (reduce the nominal price or increase the quality) in order to force shorter maturities or a higher real price.

Today, however, there is an easier solution for the competition: a solution of strength. All you have to do is go to an official who, from his position of power, decides that voluntary agreements are bad and Kaufland slaps his fingers. Innovation, streamlining, all this is challenging. It is easier to complain to the state. And it will again be the customer who pays.

Poor people farmers

You may argue that "what about the poor farmers, who will end up due to chain pressure and increase unemployment?"

We must realize that the real "righteous world" is not only about profit, but also about loss. Profit informs us that we do what we do right and usefully - we do not consume resources as a result, but we create them.

Loss on the contrary - it tells us that we are wasting resources and if we do not improve, it will be better to do something else.

Our whole life is a way of balancing between loss and profit, it is not just about monetary expression.

If "our" farmers are simply not able to compete and fail, while other farmers are able to supply their goods without any problems at given prices, that means only one thing: our farmers are worse off in "farming" than others. Resources are wasted, and if they are unable to function more efficiently, it has been much more beneficial for all of us to do something different.

Many people are lamenting about people who may lose their jobs, over farmers who will lose their farms, about 'their lives'.

Who will stand up for the future?

But no one complains about those who do not get a new one, maybe a better one work, no one laments those entrepreneurs who do not start a business. No one stands up for those whose dreams will not come true, simply because we have forcibly blocked scarce resources in unproductive industries.

When one industry dies naturally (as in our country agriculture), it means that resources have been freed up for the emergence of new industries. When we keep one naturally dying industry artificially alive, we are killing the newborn of the future.

Why - like farmers today - they do not defend defenders of the past tanners? Grooms? Telephone operators? TV announcers? Why don't they defend thousands of other professions in the same way, which no one else does today - that is, someone had to lose the job in the past?

Of course, a farmer in his fifties will find it difficult to retrain as an IT technician. But his children and grandchildren they are the ones who can be IT technicians and who - thanks to the eventual loss of their father or grandfather - see that agriculture is not the right thing for them.

But yes, it is much easier for politicians to defend what is and liquidate what could be. Populists are always looking for the easiest way to power. Those who will not do business in the future, who will not be IT technicians with a quality life in the future, but will instead live in the field and live on subsidies will pay for it.

Unfair subsidies

It is absurd to defend protectionism over Czech farmers, with EU subsidies being distributed unfairly. The problem is the EU subsidies themselves, not their size. The distribution of subsidies is always unfair in some way.

After all, let the EU subsidize other countries more easily. Do you mind that other countries subsidize food for us, so we can focus on other production with greater added value? Not me.

Crime: murder

Not only that, the fine itself is pointless for Kaufland and is only a manifestation of really unfair competition.

At the same time, it is a signal that any attempt to create a better future will be deservedly punishedwhile fraternizing with becoming a clerk will be rewarded at the expense of efficiency.

All those who defend subsidies to uncompetitive industries, those who seek to maintain protection over "traditional production," those who defend protectionism in any form and consequently i politicians and officialswho created an environment where Kaufland could get that absurd fine should be charged with a clear crime - murder. From the murder of the future.

And who should get compensation? All those entrepreneurs and employees who lost their opportunities because of them. However, it is a great pity that we can never know exactly who it was.

0 comments

  1. and yet, man, you've ripped me off like no one in 20 years.
    I quote: 'According to the Authority, more than 95 per cent of companies that supplied agricultural and food products to Kaufland were required to pay a fee of four per cent of the value of the assigned receivable in the event of a transfer of a claim against Kaufland to third parties.'
    So you call this what? Do you even know what you wrote about above? Do you understand that at all?

  2. Yes, it has already been mentioned here. The author is probably an employee of Kaufland. I will not write here that you are lying because you are lying, or (which is worse) what you write you believe. I would like a situation for all farmers and farmers to transform into IT professions overnight, and not only those, but also bakers, bricklayers, electricians and all professions that are so unnecessary and probably inferior to you. Sir, nothing seems to tell you the patriotism and self-sufficiency of the nation. Just convince people how great kaufland is, and when it eliminates what you say "take out the weaker", don't be surprised that your IT (Ajťá) salary will be small for you. So that we don't read in a few years on your new blog on the topic "how to raise a pig or how to plant potatoes." As for the fine for Kaufland, it is fully in accordance with Czech law, and if Kaufland has a problem respecting these laws, where he came from. Among other things, the fine he received is ridiculously small, as it is enough to compensate him for about 2,5 days of operation. The time will come and we will all pay as tabby for the basic foodstuffs we will import, or your beloved Kaufland will import us.

  3. Good article… :))
    As a Kaufland employee, I have personally dealt with similar longings of suppliers for years - in general, it is a problem of the bear, which enjoys honey very much, but at the same time laments that it has to scratch hard on the tree. No one forces him to do so, he can easily pick berries or catch fish, but for him the honey is so irresistibly sweet…
    Suppliers used to be forced to go around small shops around the country and try to hand over goods to hundreds of tiny customers. Even a layman can certainly get an idea of ​​the cost and degree of uncertainty of such a sale. Then chains were created that built a network of strong sales hubs at their own expense (phase 1), and then even their own central warehouses and logistics (phase 2). The small supplier no longer had to hold the sales and advertising department to give his goods to hundreds of small customers = one bulk order came (phase 1), and he no longer had to go around the country in individual shops and a few cartons = he drove a full truck to one place - to central warehouse (phase 2) This means huge savings on the part of suppliers (the smaller the supplier, the more advantageous it is for him, because giants such as Plzeňský Prazdroj have a comparable infrastructure). Chains logically try to recover the costs of building central warehouses and networks - for example, a fee for "listing" the supplier, longer maturities, lower prices, bonuses, etc. They demand as much as the market allows (like everyone else). The bargaining power of the chains is not limited by suppliers, but by other competing chains (there are about 5-7 big ones, so who doesn't like Kaufland can go to Ahold or REWE, but who cries that they are all the same, should probably think about their own business efficiency). It is still very advantageous for suppliers, delivering by truck to one central warehouse is (compared to other alternatives) still the sweetest honey, they would still like to sit at this rich table, only sometimes they plot under the table to feast and not pay for the banquet … :))

  4. Ad XeV: "Exactly, Kaufland was fined for breaking the law. The law may be controversial, but it's still the law. "
    Such a "law" has no value, it's just a stick of one group of people against another, but it's not about justice and law. The law is something I don't have to obey, but I have to respect if I want to be well (because disrespect has its consequences that I can't avoid - for example, I don't respect the law of gravity and kill myself will not defend). And this is not the law, but the order of the dictator. Laws are not invented and approved, but discovered.
    What about the Nuremberg anti-Jewish laws? Are these also laws that must be obeyed?

  5. @ carolus1:

    "Suddenly, the author is bothered by one regulatory measure in an environment that is over-regulated."

    I am bothered by almost any state regulation. In agriculture as well. Regulate, nationalize, "unwind".

  6. @Petr (and others) - and who forces those suppliers to accept those conditions and continue to supply for Kaufland? No one. It is their voluntary decision. If they continue to supply, it will obviously pay off for them anyway.

    God, exploitation? Who's the demagogue here?

  7. What to say .. the author is a total DEMAGOG who either works for kaufland or has an emotional relationship for this chain…

    such utter nonsense that one would really look .. "poor Kaufland .. got an unfair fine" - and who forced the jerks to put into the contracts absolutely restrictive and exploitative conditions for suppliers ??? NOBODY .. it was just their utter abuse of market power .. and I would put a fine 10 times bigger, which is still within the legal limit in terms of annual turnover .. it would then be completely such mores .. FOREVER !!!

  8. An unnecessarily long and completely demagogic article. The author is probably convinced that the supplier decides completely "voluntarily" to enter into a contract that is disadvantageous for him. Suddenly, the author is annoyed by one regulatory measure in an environment that is over-regulated. Farmers in particular could talk about the hundreds of regulations that make their business more expensive. Subsidies are just a small patch for the damage it causes them.

  9. @petrph: As a person in the field, I assure you that the quality of Czech people is above average even by European standards. And subsidized schools or, unfortunately, subsidized foods have nothing to do with it 🙂

  10. @JK:
    1. How specifically do subsidies and protection of Czech farmers protect us from concreting the landscape? Given that the concreting of the landscape is also generously supported by the state, for a change due to "industrial support", "building the necessary infrastructure", "regional development", etc.?
    2. In what ways should the Czech Republic be self-sufficient? In food? In clothes? In fossil fuels? In electronics? Where is the line between beneficial and unnecessary self-sufficiency?

  11. It seems a bit strange to me to compare the historical role of a tanner and a farmer. The farmer will have his place here until I completely concrete it here and asphalt. And I omit the general interest in at least minimal food self-sufficiency (of course, it is clear to me that Poles, Spaniards, etc. will be happy to feed us).

  12. Aha..A deep analysis, you have repulsed most of the objections (for example, that in the western states farmers receive higher subsidies), and in the end you came up with the solution that it would be best to retrain farmers in IT techniques. However, dear gold, they and those IT technicians in the West have better conditions for their development, subsidized by the state. Better schools, scholarships, professional literature, and finally the cheaper subsidized foods. IT technician, he hires it from the West - or ours below the price, just like when he bought from a Czech farmer. And or he hires an Indian, he also gets it cheap.

  13. That's right, Kaufland was fined for breaking the law. The law may be controversial, but it's still the law. Your bullshit about the freedom of the market will not change and it is bullshit to think that potatoes grown in our country are "more expensive" than those that you import from elsewhere. That is why a farmer cannot make a living, because someone helps others, the rules must be the same for everyone, we were already taught in kindergarten; o)

  14. Thus, Kaufland did not receive a fine so completely for the discount, but for arranging a maturity higher than the 30-day period allowed by law. Initially, no legal norm regulated this deadline, and Kaufland, like other chains, ran the maturity up to 90 days. A new law on significant market power came and ordered the "contracts" to be "torn" overnight and all maturities to be withdrawn for 30 days. Well, he appreciated the difference between the original maturity and 30 days with the price of money and transferred it to the discount, ie for the supplier's payment for early payment. On the one hand, an absurd law on the other hand, Kaufland's illegal conduct towards its suppliers.

  15. And "resources have been released" when the Czech language has been resolved… Otherwise agreement… When I heard about it in the news, my pressure increased for a while.

  16. the supplies were, the subsidies themselves, and not me. otherwise very good article)

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