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Academic Articles Awards > Economics

Private Labels: Challenges for Competition Law and Economics

Hila Nevo and Roger Van den Bergh, 40 World Competition, Issue 2, pp. 271–298

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This article deals with the competition concerns that arise from the continuing growth of private labels. It provides an overview of the existing knowledge in economics and discusses how competition authorities may profit from this knowledge in assessing potential anticompetitive effects in retailing markets. Private labels increase retailers’ power by strengthening their gatekeeper’s role. On upstream markets, private labels may enable large retailers to obtain more favourable contract terms from manufacturers that may put at risk the financial viability of the latter. On downstream markets, the popularity of private labels may allow powerful retailers to increase their market shares. Even though empirical research is still inconclusive in establishing a link between the growth of private labels and abusive buyer power, recent trends observed in groceries markets justify an analysis of likely anticompetitive effects. Insights from transaction cost analysis may help in clarifying the impact of buyer power as bargaining strength and improve the competitive assessment of private labels. The article suggests an inverse Small but Significant and Non-Transitory Increase in Price (SSNIP) test to define relevant markets and proposes a framework to balance pro- and anticompetitive effects of private labels, which could be used by competition authorities.

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