State food stores have found premises

State-owned food stores will not be located in Bulgarian Post offices, but will operate in the commercial premises of the Central Cooperative Union (the KOOP chain of stores – ed.) throughout the country. This is clear from the response of the Ministry of Agriculture and Food (MAF) to questions from Economic.bg sent under the Access to Public Information Act (APIA).

Although the company should have been established months ago and already be operational, the ministry is still preparing an order to be approved by the Council of Ministers for the establishment of the state-owned company “Magazine for the People” EAD with 100% state participation. The initial capital of the company is BGN 10 million.

The Central Cooperative Union (CCU) is an association of natural and legal persons “who, through mutual assistance and cooperation, carry out commercial activities to satisfy their economic, social, and cultural interests.”

The idea behind the CCU is to help small traders (individuals, companies, and cooperatives) to sell their products. The idea behind state-owned stores is to keep prices low for certain products, which are, however, manufactured by private companies. On the one hand, this goes against the idea of a cooperative, and on the other, it is unclear how private companies will be forced to sell at lower prices. One option is to force CCS members to sell at lower markups.

These details are still unclear, as the state is delaying its avant-garde idea.

Without consultation with Brussels

According to the initial idea, the state chain was supposed to have a 50% share of Bulgarian products on its shelves. However, economists warned that this would violate a number of European regulations, including fundamental principles of the European Union on competition and the free movement of people, capital, and goods.

Nevertheless, it appears from the responses that the ministry did not consult the European Commission explicitly on its idea.

The Ministry of Agriculture and Food strictly follows the procedure for setting up a commercial company in the form of a single-member limited liability company (EAD) wholly owned by the Ministry of Agriculture and Food, with any questions being clarified with the interested parties when necessary," they said.

When the idea was first presented, Petar Ganev, a senior researcher at the Institute for Market Economics (IME), warned that Brussels could challenge the texts because they constitute direct interference in trade relations, both in terms of quantity and price (editor's note: due to the cap on trade mark-ups).

It is debatable whether these texts will become reality," the economist said.

We recall that a similar case arose during the pandemic in 2020, when Boyko Borisov's third government, and more specifically the then GERB agriculture minister Desislava Taneva, imposed quotas on Bulgarian products in large food chains. At the time, the EC asked Bulgaria to remove the restrictions as they contradicted the principle of free movement of goods, services, and capital in the Treaty on the Functioning of the EU.

However, the relevant ministry believes that there is no risk of a challenge or even sanctions.

At this stage, there is no identified risk of sanctions or of the EC challenging the draft order,” they write.

Without consulting market regulators

The same applies to consultations with the Commission for Protection of Competition (CPC), although in early April, Economy Minister Petar Dilov explicitly stated that it would be advisable to assess the compatibility of the idea with EU competition rules.

At the time, he said that the “potential effect” of the new state-owned enterprise on competition and its compatibility with European rules “should be assessed by the CPC.”

There is no legal obligation to consult the CPC or any other regulatory authority during the preparation process, they said.

And more uncertainties

Another uncertainty is the supposedly agreed 50% share of Bulgarian goods. In response to a direct question about what the share of domestic goods in these stores will be, the responsible ministry said that “the Ministry's aim is to support Bulgarian goods.”

However, the rule that the trade mark-up should not exceed 10% remains in place.

The requirement for the final price to the consumer to be set in this way is mandatory and the Ministry of Agriculture and Food will adhere to it," they added.

According to them, “at this stage, no risk of price distortion has been identified,” as warned by experts.

Work continues

As this is a Council of Ministers order, the document is not of a regulatory nature and therefore no public consultation will be held on it.

After its adoption by the Council of Ministers, the order will be published in the Legal Information System of the Council of Ministers," they said.

Prime Minister Rosen Zhelyazkov's office has been silent on the issue of shops for a long time. In fact, since the adoption of the 2025 budget, there has been almost no new information about them.

In mid-March, Takhov gave a special press conference on the shops, talking about a law to cap markups, but soon after, he denied that a law was being prepared, calling it “just a concept” during a meeting with representatives of retail chains and consumer organizations.

Takov, together with Finance Minister Temenuzhka Petkova, was supposed to be heard in parliament on the issue of shops and markups, but this was dropped from the agenda several times.

Translated with DeepL.