Predominance of intermediaries in price setting – Morocco today

Multiplication of parallel wholesale markets.

The opinion : The Competition Council lists the numerous dysfunctions of the fruit and vegetable market in Morocco in its recently published opinion on the state of competition in the sector.

The Competition Council has published its advice on the state of competition on the fruit and vegetable market in Morocco. The Council points to numerous dysfunctions, in particular the proliferation of parallel wholesale markets, the dilapidated infrastructure, the lack of a legal framework, the multitude of intermediaries on the circuits and the tacit collusion between retailers. With regard to the setting of prices and margins within the retail market, the Council notes that these prices and margins are not the result of healthy competition, but rather the result of tacit collusion between retailers who join together to set margins which can range from double to triple.

This phenomenon of price matching is observable in all categories of retailers, be it local markets, central urban markets, souks in urban areas, weekly markets in suburban and rural areas, food shops and street traders, as well as supermarkets. The Council notes that this situation raises serious concerns about the transparency and fairness of the functioning of the retail market, and about the consequences for consumers who may have to pay disproportionate prices in the absence of real competition. In its advice, the Council points out that intermediaries occupy a strategic position between producers and consumers, giving them considerable power in setting prices. While they contribute to product availability, they also act as price makers. Their decisions have a direct impact on prices at every stage of the chain, from production to retail. They can adjust prices based on market demand, available product supply, distribution costs, consumer preferences and other economic factors.

Intermediaries therefore exercise significant market power in determining the prices of fruit and vegetables. Intermediaries capture most of the added value generated by the circuit. In fact, the intermediaries’ gross margin would be the dominant component in determining sales prices and would average almost 34% of the final price, compared to a 30% share for producers.

The Council notes that unlawful price manipulation is a practice prohibited by Moroccan law, in particular by Law No. 104.12 on Freedom of Prices and Competition, and by Law No. 13-83 on Combating Fraud in Goods. It is also important to mention the proliferation of informal parallel markets in the absence of any controls. Although there is no precise data on the size of these informal markets, operators of the Fruit and Vegetable Wholesale Market (MGFL) in Casablanca estimate that their weight represents more than 25% of the product flow circulating in the city.