German regulators order Wal-Mart, rivals to raise prices

BERLIN - Wal-Mart's ''Always Low Prices'' were too low for strict German regulators, who ordered the U.S. giant and two German rivals Friday to call off their price war on groceries because it could drive mom and pop shops out of business.

The German Cartel Office found that Wal-Mart and the Aldi and Lidl discount supermarket chains were selling staples such as milk, butter, flour and cooking oil below cost on a regular basis. That practice is illegal in the highly regulated world of German retailing.

If allowed to continue, office president Ulf Boege said, such a policy could push smaller stores out of business, clearing the way for the big guys to raise prices in the future.

''The material benefit (of below-cost pricing) to consumers is marginal and temporary, but the restriction of competition by placing unfair obstacles before medium-sized retailers is clear and lasting,'' he said.

Not everyone shopping at Berlin's freshly remodeled Wal-Mart superstore was happy to have the government looking out for their long-term interests, though.

''Life in Germany is expensive enough as it is,'' said Franz Roth, a 52-year-old locksmith buying the weekly groceries with his wife, Gabi. ''When the likes of Wal-Mart come along and force the others to pull down their prices, that's a good thing.''

Smaller shops have it tough, they conceded, but they blamed the tax man for forcing them to pinch pennies.

''It's the government's own fault,'' Mrs. Roth said. ''They take so much from us in things like gas tax that everyone has to look out for themselves.''

Wal-Mart, which has been working to establish a foothold in Europe's largest market, said in a statement from its German headquarters that it would ''orient'' its pricing to comply with the law.

''However, we still remain committed to lowering the cost of living in Germany by offering our customers the best quality products at the lowest possible prices,'' it said.

Aldi and Lidl had no immediate comment.

At a news conference in Bonn, Boege said he had given notice to the three companies on Thursday and threatened them with fines of up to $445,000 for noncompliance.

He said he was not interested in setting up ''protective fences'' for small stores.

''To me it's more about seeing that independent companies are not pushed out through the unjust pricing strategy of big companies with superior market strength,'' he said.

The German Retail Trade Association greeted the decision as a ''hopeful signal for the end of the ruinous cutthroat competition.''

Wal-Mart, the world's largest retailer, has shaken up German retailing since it acquired its first small chain of stores in December 1997. It has invested heavily in remodeling the stores to make them more ''consumer-friendly,'' hiring more personnel to improve in-store service and upgrading inventory tracking systems.

Wal-Mart, which has more than 2,500 stores and supercenters in the United States, has built up a network of 95 stores in Germany and has 240 outlets in Britain following last year's takeover of supermarket chain ASDA Group.

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