Conditional purchase behaviour
This means the purchase of goods only at the condition of significant concessions made by the suppliers. This behaviour has two categories. The first is where a purchaser is in such a dominant position in comparison with a supplier that the purchaser`s business - at least in the short and medium term - becomes vital for the supplier, so the buyer can extract lower prices from the supplier, in part because of assured orders, or because there is no alternative. The second type is where the buyer will buy only on condition that other retailers and outlets are not supplied with the product or with a similar version of the product. For example, retailers complain when discount shops are also supplied with the same product.

Exclusivity contracts
It is problematic why a seller might agree to an exclusionary contract. There might be some desire to foreclose the market and thereby allow for higher prices which are profitable both for the retailer and the supplier. On the other hand the tight buyer-seller relation which excludes the externalities resulted from the independence, through the double marginalisation does not allow the retailer to receive alone all the benefits of the improved sales and the seller to enjoy alone the benefits of the product development or of the reduction of costs. Of course it is possible that the retailer at first offers favourable exclusionary terms, then after the conclusion of the contract the conditions of the business step by step become worse. It is also possible that the retailer loosens its constraints if other retailers are competing (with exclusivity contracts) for the given supplier`s favour, too.

Cloning behaviour
The protection of brand names, trade marks, patents may vary from system to system what might offer opportunity for abuse. The own-label products of the retailers are often close (and, because of the elimination of the additional costs, cheaper) copies of the carefully designed, developed and tested manufacturers` products, but they attract away customers from their suppliers because of the prices or the discounts and promotions of the own-label products. It often occurs that retailers make their suppliers manufacture the products that will be sold under the name of the retailers` own-label.

Joint marketing
This means compelling the producer to engage in a joint promotion exercise. This category may involve a number of different practices: a special discount price which only applies to the retailer`s customers, a unique package for customers, a joint advertising campaign. It might be beneficial for both parties, but may be the source of unequal benefits as well.

Predatory buying of inputs
As a strong seller can drive his potential rivals out of the market by pricing low, a retailer may seek to expand its purchases to force out a rival by driving up factor prices. This cost-raising strategy is especially effective where the competitors have no alternative because of the scarcity of the resources, the specialised labour and high-quality raw materials.

Strategic purchasing of facilities
Control of the essential facilities for distribution is a general feature of privatised public utilities. Therefore the access conditions (pricing) are usually regulated to prevent the abuse of the dominant market position. Nowadays the large supermarkets represent the form of access where the producers meet the final consumers. While these large retailers often operate on national or on an even wider market, the manufacturers might distribute their products only in a much more limited area.

Reciprocal dealing
It is related to monopsonistic buyer purchasing from a specific seller on condition that the seller is also going to buy products from the buyer.

The real effect of the mentioned various practices is unclear, it might be beneficial and harmful, too. Whether the practice is a simple marketing tool or a problematic, competition-restricting activity is highly affected by the given environment (competitors, suppliers, consumers, regulators) and by the structure, characteristics and concentration-level of the market.

Exclusion from the list
A serious punishment affecting the producers, that is the supply side, is exclusion from the list. It is a kind of menace: if the producer does not yield to the retailer, does not pay slotting allowances or in another way puts his foot down, the strong retailer abusing his market position may take out the producer from his list of suppliers. If the accustomed consumer does not find an excluded product on the shelves, she would either not buy anything, because it was a specific not-substitutable impulsive product (both parties lose profit), or would buy it somewhere else (delaying, the excluded retailer loses profit), or in the long run would choose another store (the retailer loses a lot: whole consumers` "baskets"), or would choose another product or brand (the producer loses).

Beside the characteristics of the product and the consumer`s mood, the strategy chosen by the consumer depends for example on the proportion of the cost of switching brands (CSB) and the cost of switching stores (CSS). Lower value means bigger strength. But if the consumer can easily switch stores and shops it is likely that the retailer would consider whether to exclude one of his suppliers or not. This makes it possible to take advantage of the economies of scope.

Terms of business
Retailers might act together to improve their position against their suppliers, but as this kind of action is forbidden by law, they can do it under the practice of tacit "standard terms of business". There are broadly used tacitly agreed contract terms which include for example "the usual" sharing of promotional costs between buyers and sellers. To make the purchase easier and to make the bargaining position stronger the purchasing associations are increasingly popular

4. International experiences in the handling of buyer power

The Hungarian topicality of the current issue renders the international experiences and the way of handling the buyer power interesting, , with special regard to sales below the cost of purchase or production. The national characteristics and the stage of development also have to be considered when drawing on other counties` experience. In Hungary the questions of buyer power of supermarkets and the related safeguarding of interests are popular topics in the media, both when local or international problems are at issue.

Experiences of OECD countries demonstrate the existence or will of some kind of a regulation on pricing, differing from country to country depending on the concept of public interest and economic policy followed. However a solution satisfying all interested parties, hasn`t appeared yet. Important factors of the process are the book-keeping system and transparency of the operation of retail chains, the basic principles of economic policy related to the competition policy, the power of trade unions, the degree of concentration and the speed of the concentration process.

In 1994 the McKinsey Global Institute¹³ made an analysis on employment issues in the retail sector. The publication pointed out the fact that the barriers of market entry (such as limitation of opening hours and of zones or the right of veto given to the existing retailers, etc.), under certain conditions, may increase the anti-competitive nature of vertical restrains in the retail sector. These administrative restrictions may block the increase of employment and value-creation, may limit the purchase choice of consumers and, contrary to their original target, they do not protect the individual traders, who are existing outside the chain, since the number of small shops is gradually shrinking.

In 1998 three members of the staff of the Office of Fair Trading¹⁴ (Paul Dobson, Michael Waterson and Alex Chu) released a publication on the economic effect of buyer power. The report on retail sector was met by great interest since the authors concluded that the concentration in the food retail sector had not resulted in lower consumer prices but in higher margins. The scepticism of the researchers, however, is not reinforced by the practice or the theoretical background.

In 1981 the Monopolies and Mergers Commission¹⁵ made a wide ranging assessment on margins and discounts applied by retailers. They found that the discounts, which were gained from the suppliers through the buyer power of the largest supermarkets eventually benefited the consumers due to the lower prices. The three experts of the OFT however were dealing with the problem theoretically during the time when they were also taking part (and they still do) in the assessment of the end of the century on the profitability of retail chains.

In the view of the authors the buyer power and the seller power are going hand in hand which undermines the competition between the traders and the suppliers. Also the consumers do not benefit from the increased margin related to the concentration in the food retail sector. The buyer power is defined as the situation where an undertaking or a group of undertakings get more favourable conditions from their supplier than which would be available or expectable for others or in normal competition conditions. A simple definition of buyer power, based on the differences between prices only, however, might lead to unnecessary investigations of the OFT, since the price gap might be caused by different costs of supply or the different conditions of contracts. The authors emphasised also the danger of generalisation and stated that, in spite of the same tendencies detected in the EU Member States and other countries, the British experiences might not be used directly in other parts of the world. The buyer (or seller) power of retailers cannot be evaluated, picking it out from its economic circumstances, its proper place and time, and its competition relations.

In addition to the research work, more and more competition supervision proceedings and market assessments are launched by the competition authorities on supermarkets to find out whether they are in a dominant position (compared to their competitors or suppliers), if they are abusing it or operating against the public interest.

.4. Some economic policy questions

When tackling retailer competition problems the parties involved meet a couple of factors which should be taken into consideration, such as directives which should be followed, traditions, experiences and novelties. The Hungarian retail trade statistics are very complex, often deficient and less reliable, their utilisation is a question of attitude and interpretation. The comparison of certain data, observations based on different aspects, values estimated by different methods is especially problematic. However there are always some undisputed facts and quasi indisputable intuitions. For the economic policy considerations the following are the main questions related to the buyer power assessment: