RETAIL RESTRICTIVENESS ANALYSIS IN EASTERN EUROPE RETAIL RESTRICTIVENESS ANALYSIS IN EASTERN EUROPE | Page 5

1. CONTEXT OF THE STUDY
This study is focused on regulatory environment for retail, one of the most important economic sectors
across countries of the European Union and what we call Emerging Europe across the South-Eastern rim
of the European Union. Accounting for 4.5% of GDP and 9% of the employment 3 , retail is one of the most
significant tertiary sectors in the European Union. Due to a relatively high share in overall employment and
its higher capacity to provide a workplace to diverse social groups across varied socio-economic
backgrounds, retail sector plays a role in stabilising the society.
In recent years, the regulatory framework in the EU retail sector is attracting some interest. The European
Commission has received a number of complaints 4 related to issues of doing business in the industry. This
is hardly surprising, as in many EU countries the corresponding regulation was put into effect decades ago
and has not been adapted to the present-day realities such as digitisation or globalisation. In particular,
retailers have complained about the restrictive conditions for opening, transforming or operating retail
outlets. The concerns that such restrictions could have an impact on the concentration, accessibility and
affordability of the products for end consumers have also been expressed.
Several studies conducted over the last 15 years have found evidence of a possible correlation between
retail establishment restrictions and the price levels, possibly driven by the increased cost of operations
for the retailers operating on the heavily regulated markets as well as more limited ability to innovate (i.e.,
explore new formats). Eventually, it is likely that such extra cost is passed on to customers in the form of
higher prices and/or lower assortment. As one recent example, the analysis of the impacts of the Roi’s
Trade and Handicrafts Orientation Law 5 in France has found that regulation has reduced employment in
the retail sector by at least 3% and have caused a 6% increase in supermarkets’ costs 6 .
In light of these trends, the Commission has initiated a set of studies to research the impact of the retail
regulation among the Member States including “Legal study on Retail Establishment through the 28
Member States: Restrictions and Freedom of Establishment” and “A European retail sector fit for the 21 st
century”. The former was aimed at making a comparative legal analysis examining the nature and scope
of the regulatory requirements related to the retail establishment and their compliance with the EU
Services Directive. The latter was focused on the regulatory aspects of running a retail business. One of the
results of the “A European retail sector fit for the 21 st century” study is the formulation of a combined
measure of retail restrictions, the 'Retail Restrictiveness Indicator' (RRI). The RRI was developed to provide
a comparative snapshot of the regulatory framework across all member states within the EU against a
structured methodology that allows comparing the level of regulation along a set of defined regulatory
aspects.
This structured approach established by RRI together with improved opportunity for comparison allows for
action-oriented conclusions on the areas of legislation that seem to be excessive in the wider context in
any given country, especially after cross-referencing with the overall market performance indicators.
However, it is worth noting that the studies and the corresponding indicators were solely focused on the
EU countries.
An alternative approach to assessing retail restrictiveness was used by the Organisation for Economic Co-
operation and Development (OECD) 7 . The organisation compiled a set of sectoral indicators to measure
regulatory conditions in the retail across OECD countries. The retail indicators covered barriers to entry,
operational restrictions, and price controls. However, these indicators were established only for large
3
https://ec.europa.eu/growth/single-market/services/retail_en
According to the Legal study on retail establishment through the 28 Member States Restrictions and freedom of establishment: final report. Volume I – Study,
https://publications.europa.eu/s/kRIQ
5
Legislation passed in France in 1973, which limited the physical size of certain businesses, for example, it introduced a special permit for businesses > 1000 m² in towns with less than 40 000
inhabitants.
6
M. Bertrand, F. Kramarz (2004) Does entry regulation hinder job creation? Evidence from the French retail industry.
7
Regulation in retail trade 2013, https://stats.oecd.org/Index.aspx?DataSetCode=RETAIL
4
5