Key findings

• De facto exclusive distribution relationships: Although this research originally focused on exclusive distribution agreements, it showed that such written agreements are relatively rare. In actual practice, there are often de facto exclusive distribution relationships, whereby one distributor structurally acts as the sole supplier of a brand or branded product in Aruba, without this being recorded in writing. Therefore, the question is whether the distributor can invoke this exclusivity in a legal sense vis-à-vis the supplier. This will depend on the circumstances of the case. In any case, this de facto exclusivity generally has similar effects on market access and competition as formal exclusive distribution agreements.
• Market structure: Imports in the Aruban market are dominated by a limited number of distributors with de facto exclusive brand rights, resulting in an oligopolistic market structure for a large number of products. Due to established relationships between distributors and suppliers and the limited incentive for suppliers to hire additional local distributors, given the size of the Aruban market, new importers/distributors experience high entry barriers.
• Competition: There is interbrand competition (between brands), but intrabrand competition (within the same brand) is largely lacking because suppliers typically cooperate exclusively with one local distributor, usually without such cooperation being based on legally enforceable and written exclusivity agreements. In addition, the relatively small size of the domestic market often makes it unattractive for importers to compete at brand or product level. At retail level, there is considerable competition between supermarkets, neighborhood supermarkets and mini-markets.
• Parallel imports: Parallel imports can strengthen intrabrand competition by making products of the same brand available through alternative channels, outside the official distribution network. In actual practice, parallel imports are mainly accessible to larger supermarkets with sufficient purchasing power and logistical capacity. There are indications that certain neighborhood supermarkets and mini-markets also engage in parallel imports on a joint basis, but the frequency and extent of this could not be determined with certainty within the scope of this research. Based on the available data, the effect of parallel imports on overall market operation appears to be limited.
• Vertical integration: Many distributors are also active at retail level. This vertical integration may pose competition risks, as integrated distributors have an incentive to favor their own points of sale through more favorable prices, better availability or exclusive promotions. In addition, they have access to commercial information from competing buyers, which can give them a strategic advantage and further raise entry barriers. Price structure and perception: Data from the Central Bureau of Statistics (CBS) show that large supermarkets structurally charge lower prices than neighborhood supermarkets and mini-markets for most product categories, despite the public perception that large supermarkets are more expensive.
• Competition law assessment: The distribution agreements examined generally do not contain any restrictions of competition, such as vertical price fixing, exclusive purchasing obligations or limitations on parallel imports, and are therefore not, in themselves, in breach of the Competition Ordinance. Furthermore, since the entry into force of the Competition Ordinance on January 1, 2024, there have been no indications of (a threat of) boycotts, refusal to supply or other sanctions in response to detected or suspected parallel imports. However, there are signs that such conduct did occur before that time.
• Canasta Basico: In its current form, the Canasta Basico provides insufficient protection against international price fluctuations and is, in practice, partly circumvented, causing it to fall short of its objective of offering a number of basic food products to consumers at low prices. As a result, this instrument is ineffective and may even have a market-distorting effect. The AFTA therefore recommends that the instrument be reconsidered so that supply and demand, supported by healthy competition, play the primary role in ensuring the affordability of food products in Aruba.

Conclusion

Although exclusive distribution agreements are not, in themselves, prohibited under the Competition Ordinance, this study shows that the combination of de facto exclusivity, limited intrabrand competition, high entry barriers and vertical integration creates structural risks to healthy competition. Parallel imports can strengthen intrabrand competition, but in practice remain primarily accessible to larger supermarkets due to logistical and scale advantages.  aspects and scale advantages. Based on this study, it cannot be concluded that exclusive distribution agreements explain the relatively high prices of food products in Aruba. However, there are indications that the widespread de facto exclusive distribution relationships, combined with limited level of parallel imports, contribute to this, without necessarily constituting a violation of the competition rules. AFTA therefore calls on market participants to report to the authority any suspicions of exclusive agreements in the distribution of food products in Aruba, as well as any restrictions on parallel imports imposed by suppliers or local distributors, particularly in markets where there is little
intrabrand competition. Based on these reports, the AFTA can then conduct further investigations and, if necessary, take enforcement action.

Click here to read the full report: Market Research on Exclusive Distribution Agreements in the Aruban Market