The Ministry of Agriculture is taking unprecedented action against a supermarket chain over a promotional campaign. The ministry objects to German retailer Kaufland having offered shoppers the chance to buy a litre of milk for the token price of one Czech crown.
In a historic first, the Ministry of Agriculture has asked the Office for the Protection of Competition to investigate the discount on milk offered by the German hypermarket Kaufland, which it says amounted to selling goods at dumping prices.
Price dumping, or selling goods at below production costs, is illegal. It is also notoriously difficult to prove. Furthermore, offering a temporary discount on items or services as part of a promotional campaign is perfectly legal.
So, the question before the Office for the Protection of Competition is whether the retailer Kaufland was within its rights to sell milk at below production cost to customers making a purchase of at least 100 crowns.
The larger issue, according to Minister of Agriculture spokesman Vojtěch Bílý, is that ‘promotional sales’ are hurting Czech food producers and depriving the state of value-added tax.
“What bothers us is that such sales undermine the position of farmers and grocers and in this way, in fact, distort the market. Below-cost prices can further lead to the increased waste of food. What’s more, such market behaviour impacts the collection of VAT.”
A ruling by the Office for the Protection of Competition against Kaufland over its short-term, promotional sale of milk could set a precedent that would have a ripple effect well beyond the retail sector.
However, according to Marta Nováková, president of the Czech Confederation of Commerce and Tourism, that’s unlikely to happen. The ministry’s complaint against the German supermarket chain, she says, is “nonsense”.
“I was quite surprised that ministry officials are claiming this amounts to some VAT cut or anything like that. The retailer is acting in full accordance with the law. This was a marketing action. Absolutely no law has been broken. The product came from the retailer’s own inventory, so it is not harming anyone.”
Be that as it may, Minister of Agriculture Jiří Milek (ANO) is considering asking other state authorities to also investigate such promotional practices. He is also arguing for the introduction of a minimum profit margin on food sales, a move the minister says is necessary to protect Czech farmers and greengrocers from unfair competition by dominant players.