Impact of unfair purchasing policies on the retail price: A case study of individual goods in the food supply chain

Abstract

This paper provides empirical evidence of the negative aspects of unfairness within the food supply chain concerning the purchasing policies of a micro-food producer who is also a supplier of large retail chains in the Republic of Croatia. When looking at the business relations between micro-enterprises and retailers, the authors identify a problem in the form of purchasing policies of retailers that contradict the legislative intention of the Act on the Prohibition of Unfair Trading Practices in the Food Supply Chain and the Directive of the European Parliament and the Council on the same subject. The paper aims to point out to the legislators that their approach to the issue has not led to the economic sustainability of the vulnerable links in the food supply chain, i.e., the supply side companies, as the problem has mostly been diverted to unfair prices. The authors point out the undue rigidity of the legislation concerning market competition in prohibited vertical agreements and the undue flexibility in price intelligence. In addition, this paper points out that unfair purchasing policies may constitute inflationary pressures not yet recognized by macroeconomic theory. The limitation of the paper stems from the likely generalization based on inductive inferences based on a case study. There is the possibility of further research on this topic in the short term to make informed economic and policy decisions.

Keywords

• food processing industry
• SMEs
• supply chain
• unfair purchasing
• retail prices
• legislation