The (distortionary) power of retail companies

In Spain, meanwhile consumers complain about the price they pay for a kilogram of strawberries, farmers demonstrate in central squares giving out boxes full of strawberries free of charge. Farmers say that what they take from their work is not enough to make a living. Then, who's getting that important difference between the price paid by final consumers and the cost for farmers? What explains this distortion?

We have always been taught about the supply and demand curves that set the prices and quantities in perfect markets. We have also learnt about how supply and demand functions are set. However, very often, we forget about retailers, those companies in charge of moving those products from factories or farms to the shelves of the supermarkets. Everything would be OK if these companies were competing in perfect conditions. However, the important margin they are able to accrue can only be explained by the extraordinary market power they have achieved.

On the supply side, the important concentration movements happened during the last decade has allowed big groups (such as Carrefour or Wal-Mart) to go to farmers and use their increasing power they have to access final consumers to set a price. On the demand side, it is becoming very difficult for consumers to effectively enjoy the price reductions derived from effective competitive markets...

And make no mistake, it is not only a matter of lower prices... but also quality. Recent news talk about Blockbuster having decided to rent movies just only in blue ray format instead of the HD DVD one. Blockbuster left Spain a few years ago (the business model didn't work out here!, but they are very well positioned in the US market. Who is in charge of deciding which products are better? the final consumer or the retailer?...

Are retailers constraining our chances and then competition? If the answer is yes, then national regulators should start to work!