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Says Supermarket Collusion Keeps Prices High

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Says Supermarket Collusion Keeps Prices High

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Photo: Golli.

Silent consultation between low-cost retailers in Iceland keeps prices artificially inflated, says Auður Ava Ólafsdóttir, project manager of price oversight at the Icelandic Confederation of Labour. Supermarkets Bónus and Krónan take advantage of a small market to keep prices high when they could be lowered, Auður stated in an interview on RÚV morning radio today.

“These two parties are in a very similar place in terms of prices and they naturally only see it in their favour to keep prices in a certain place,” stated Auður. “Although these are low-cost retailers in Iceland they could actually be lowering prices more than they are.”

“There is leeway here in Iceland for price reductions, as we saw when Costco came to the country. It’s cheap to import goods and the króna is strong. There are many factors that should have the effect of reducing prices, yet prices have remained quite stable for many years.”

This is because Krónan and Bónus take advantage of the Icelandic market’s lack of competition, Auður says. “They’re careful not to compete with each other’s prices too much because both parties would lose out. It is to the economic advantage of both to have it that way and they can do it by virtue of their strong position.”

Auður says she hoped Costco’s opening in May of last year would lower prices over the long term, but the wholesale retailer’s effect seems to have been temporary. Prices “took a little dip until they opened and into the fall and then rose again and are back to a similar level as before.”

Guðmundur Marteinsson, Bónus’ CEO, says the small price difference between products at Bónus and Krónan can be attributed to both companies lowering prices as much as possible. “There is no leeway for price reduction,” he stated. “We cannot sell products at below cost.” He pointed out that Costco’s recently published annual financial statement showed a loss of ISK 100 million ($900,000/€780,000).

Gréta Margrét Grétarsdóttir, CFO of Festi, also denies the two retailers are artificially inflating prices, insisting the similarity in price between the stores is a result of active competition rather than consultation.

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