Review of Industrial Organization 22: 337–340, 2003.
Buyer Power and Competition in European Food Retailing, Roger Clarke, Stephen
Davies, Paul Dobson and Michael Waterson. Edward Elgar: Cheltenham UK, 2002.
This is a valuable and courageous book. Valuable because it deals with an import-
ant and growing competitive problem – the buying power of large food retailing
organizations – and does so in a credible manner. Courageous because this is a
very difﬁcult topic on which to obtain data. This is the ﬁrst book-length treatment
of this topic of which I am aware. In the U.S., for example, where the problem
has been recognized for many years, no one has attempted a study of the scope of
Clarke et al.
The book does have several major limitations, some of which are puzzling
given the scholarly reputation of the authors. But on balance, it is a worthwhile
contribution to the literature.
The approach of Buyer Power is similar to the well received Sunk Costs and
Market Structure by John Sutton (1991), though this effort is far less ambitious than
Sutton’s. Clarke and colleagues use a case study approach to empirically examine
buyer power in four countries: France, Germany, Spain and the U.K., and in three
products: washing powder and detergents, coffee and butter and margarine. These
are based upon 47 interviews of individuals or organizations including 24 suppliers,
9 retailers, three buying groups and 11 others.
Part I of Buying Power provides a concise and clear treatment of theoretical
underpinnings for an analysis of buyer power. Retail buyer power is shown to
be of particular concern when retailers also have market power as sellers. A
ﬁve-step framework for analyzing buyer power is provided. In addition to buyer
inﬂuence on transaction prices, buyer-induced vertical restraints such as slotting
allowances, listing fees, exclusive supply obligations and retroactive discounts are
manifestations of buyer power.
Part I is completed with a useful chapter reviewing the extent to which compet-
ition policies in European countries are able to challenge the abuse of buyer power.
In countries such as France and Germany, relatively new legislation exists that is
designed to combat the abuse of buying power based on “economic dependency”.
While such statutes have been little used, they suggest a much greater concern in
European countries than in the U.S. While growing retail consolidation in the U.S.