War of words follows consumer watchdog action against retail chains in Bulgaria

A war of words lasting days has followed action by Bulgaria’s consumer protection body against retail chains in Bulgaria, with the row inevitably also attracting political comments.

As The Sofia Globe reported on November 9, Bulgaria’s Consumer Protection Commission (CPC) said that it had fined supermarket chain Kaufland Bulgaria 75.7 million euro, citing “unfair trade practices towards Bulgarian food producers”.

The regulator announced three violations against suppliers: pressure to reduce delivery prices, unfair deduction of fees for services, and unjustified delay in price increase negotiations. The decision is subject to appeal in court.

The chain rejects the accusations, claims that the total added value they generate for the state is almost 14 billion euro and it is preparing for a legal battle.

Mihail Petrov, CEO of Kaufland Bulgaria: “And if Kaufland goes on a bobsled ride down, then the bankruptcy of Corpbank will seem like a spring breeze to them. Kaufland has a lot of loans, a lot of suppliers, it has 8,800 employees and stop practicing on it. I can’t wait to go to court and turn the CPC’s act into dust”.

The retail chain’s director’s warnings about a possible outflow of investments prompted a sharp response from Economy Minister Alexander Pulev, who described Petrov’s tone as arrogant and said that the government would not give in to such warnings.

“We are not at war with retail chains, we are at war with unfair trade practices,” Pulev said.

The FMCG (Fast Moving Consumer Goods) market is quite profitable, quite liquid, even if there is an outflow in the market position of a chain, this vacuum will be filled literally within a few weeks by their competitors,” he said.

“Before threatening the Bulgarian state, let this gentleman open the statistics and look at the fact that literally the latest data for this year show a 100 per cent growth in foreign direct investment in the country, so I am calm, I have no reason for any concern about this type of arrogance,” Pulev said.

On Facebook, Prime Minister Roumen Radev’s Progressive Bulgaria ruling party said: “No matter how big you are, you are not above the law.

“When he (Petov) makes an analogy with CorpBank, the Kaufland manager confuses the law with lawlessness,” Progressive Bulgaria said.

“No one is stronger than the state when it applies the law to protect the rights of its citizens. Such declarations only confirm the correctness of the control bodies. Instead of arguments, we hear threats,” the ruling party said.

The Confederation of Independent Trade Unions in Bulgaria (CITUB) also expressed serious concern about the public statements by the management of Kaufland Bulgaria .

CITUB said that it does dispute the company’s right to defend its interests through legal means, but it is unacceptable for the jobs and fate of employees to be used as an argument to exert pressure on state institutions.

“Every company has the right to defend its interests in court. At the same time, CITUB considers it unacceptable for the jobs and fate of workers to be used as an argument for putting pressure on state institutions in connection with the exercise of their legal powers,” the trade union organisation said.

Ivailo Mirchev, an MP for opposition coalition Democratic Bulgaria, said that Petrov’s statement was arrogant and unacceptable.

Instead of scaring with catastrophic scenarios, the management of Kaufland should think about whether it has always been fair to Bulgarian producers over the years and whether it has had unacceptable commercial practices, Mirchev said.

Milena Dragiyska, chief executive of Lidl Bulgaria – a Lidl shop in Vidin was shut down temporarily earlier this week by the Bulgarian Food Safety Agency over alleged violations – described to the media how the pressure was affecting the daily work in the shops.

Dragiyska said there have been cases where seven, eight or nine inspectors have arrived at employees who are on their own shift.

She alleged that inspectors had apologised to staff, explaining that they were ordered to find grounds for a sanction.

“Actually, the big question is what is the goal? That is not clear to us,” Dragiyska said.

She warned that the consequences of this pressure could affect thousands of jobs and Bulgarian producers who rely on the chains for the sale of their goods. According to her, Lidl alone works with over 300 Bulgarian producers, and the volume of joint work is growing.

Dragiyska insisted that the conversation with the state focus on irrigation, labour, financing and the competitiveness of Bulgarian production.

Bulgarian food producers and processors have said that state pressure on large retail chains is also threatening their own production.

Zhivka Grozdeva from the Association of Fruit Growers in Bulgaria believes that the voice of producers who have been working successfully with the chains for years remains silenced in the public conversation.

At a conference of the Association for Modern Trade – an association of which most major retailers in Bulgaria are members – Grozdeva said that large retailers provide a market for significant quantities of Bulgarian fruits and vegetables.

” Without them, part of the production would remain unsold or even unpicked ,” said Grozdeva, who is also a fruit producer.

She said that no one is obliged to work with chains if they prefer another option.

Asked to comment on the average markups on Bulgarian fruit, she estimated that they amount to about 10 per cent-15 per cent, unlike small shops, where, according to her, it reaches 50 per cent.

Grozdeva described the relationship with the chains as a direct negotiation process: the manufacturer sends an offer, the retailer responds, and both parties specify the terms and deliveries.

According to her, the main obstacles to Bulgarian production lie elsewhere – in insecure access to water for irrigation, as irrigation systems cover 1/7 of the country’s territory, the shortage of workers, and the growing administrative burden.

“They increase costs and make it difficult to compete with producers from other countries,” Grozdeva said.

“I see a partner in the large chains,” Vladislav Mihaylov from the National Association of Dairy Processors said during the Association for Modern Trade conference.

Mihaylov described the pressure on foreign chains in recent weeks as an “undeclared war”.

“Nobody wins from any war. Neither the state nor the consumers. We, the producers, are between a rock and a hard place,” Mihaylov said.

Nikolai Vulkavnov, executive director of the Association of Modern Trade, said: “Progress is not measured solely by the price of cheese in the shop”.

He said that constant changes in rules, unpredictable enforcement and huge sanctions could lead to investments being frozen or withdrawn, with consequences for jobs and incomes.

“There will be no new jobs, existing ones may be cut, salaries may fall,” Vulkanov said.

On November 13, GERB leader Boiko Borissov sharply criticised Kaufland Bulgaria’s Petrov’s statement.

Borissov described Petrov’s words as absolutely unacceptable: “They will certainly fire him and all this has to happen, because no one will like such a statement, no one will allow it”.

The GERB leader said that he was wondering whether the government wanted to take Bulgaria back to the time of the communist-era state-owned shops.

Borissov said that he suspects that those close to the government are interested in the properties of Kaufland and other large retail chains.

“I guess because communists never do anything for their own sake, and the best properties in big cities are in these chains,” Borissov said.

In my opinion, one of Radev’s oligarchs has looked around in the chains and now they will do everything possible to expel them. They are worth chasing, I emphasise, with such behaviour, but they do nothing for their own sake,” he said.

(Photo: Bartosz Wacawski/ freeimages.com)