Chapter 4. MARKETS AROUND THE WORLD

Europe
Other countries

The following section provides a brief description of the experiences of various countries around the world.

Europe

Spain

The most recent improvements in wholesale marketing were introduced in the 1960s. In 1966, the Empresa Nacional Mercados Centrales de Abastecimientos S.A. (MERCASA) was set up by the Ministry of Trade with the specific purpose of creating a modern network of wholesale facilities to replace the old central markets in each major city.

The agreements between MERCASA and each of the municipalities responsible for markets, and wishing to join the system, gave two possibilities:

1. The formation of a company, which incorporates MERCASA with the relevant municipal authority and the professional organizations in the sector that wished to be included with appropriate contributions in cash or kind. Generally, share subscription rates tend to be the following: 51 percent is held by the municipality, 49 percent (maximum) or 26 percent (minimum) is held by MERCASA and the remainder is held by the professional bodies. The company is a mixed enterprise, generally in the form of a limited company subject to both public and private law.

2. The formation of a syndicate, also in the form of a limited company, whose shareholders, in addition to MERCASA, are the producer, trade and consumer associations and organizations, with the common purpose of promoting and building the new markets. This option tended to be used in cases where, for whatever reason, municipalities chose to join the venture in the start-up phase of the market projects, sometimes for obvious financial reasons. Shortly before start-up, the company statutes are adapted to the local legislation. The municipal authority purchases the corresponding number of shares and the simple limited company becomes a mixed municipal enterprise. Subscription rates in the new stock capital are usually the same as those stated above. In certain specific cases MERCASA’s share may be higher to cover the total financing.

Italy

There is an abundance of recent legislation to regulate Italian wholesale markets. The most important laws are:

Law 125/1959 on wholesale markets;
Law 41/1986 on state funding for their construction;
Deliberation 21.12.88 on the granting of financial aid for their construction;
Decree 2.2.90 on evaluation criteria for the granting of aid to wholesale markets;
Law 142/1990 on Decree of Local Autonomy;
Deliberation 31.1.92 on the granting of financial aid for their construction.

However, Italian wholesale markets were aging structurally, were inefficient and making losses. With a view to promoting investments in renovations and new plant, Law 41/1986 was passed to grant state funding under certain conditions (economic and geographical importance of the wholesale market, majority public shareholdings in the company, multipurpose market structure).

Generally, the private sector was given few incentives to invest in these structures. About forty “syndicated companies” were created, some of which were selected to receive funds for new wholesale markets (the syndicates of Bologna, Turin, Catania, Cosenza, San Benedetto and Verona. Important ones, such as Rome and Milan were left out). However, these did not wish to be responsible for the management of the new wholesale markets and delegated management to companies that were mainly privately owned.

Under the new wholesale management plan, which is regulated by Law 41/1986 (market plan) and Law 142/90 (Decree of Local Autonomy), the local authorities establish the services and create a joint stock company and a special company (a modern version of a municipal enterprise) to which the management is automatically transferred. In turn, the municipality transfers the management of services to a syndicated company as a concession by tender.

As regards the management regulations, everything is subject to the old legislation: concessions to wholesalers and private companies are granted for a maximum period of 7 years, the market commission must be completely distinct from the council of administration (board of directors).

The market plan Law allocates substantial funds to support companies promoting wholesale markets and syndicated companies with public sector majority holdings (regions, municipalities and chambers of commerce) in setting up wholesale food markets at national, regional or provincial levels.

With the Decree 2.2.1990, which granted funds to syndicated companies, the intention was to create an integrated and functional system to achieve a balanced national distribution of goods, eliminating all forms of duplication, through centres located in the best sites from the point of view of communication by air, sea or land, thus facilitating the movement of goods and freeing urban centres. The system was also aimed at improving warehousing, refrigeration, and providing real-time information on other markets, stocks, prices, flow of goods, foreign trade, etc. The Decree defines wholesale markets and indicates that the structure and functionality of the new wholesale markets should be adapted to consumer trends and retail distribution requirements.

France

Wholesale markets are organized as a Network of Markets of National Interest (Reseau de Marchés d’Interêt National, MIN) based on laws passed in 1953, whose objective was to simplify or reduce marketing channels so as to reduce costs and clarify market transactions, while allowing the possibility of improving the quality of products throughout the marketing process.

The classification of a wholesale market as a MIN, or the creation of a new one, may be ordered by a decree of the Conseil d’Etat (Council of State), after consultation with the local authorities concerned. The economic reasons for such a decree include the concentration of supply on a single site with adequate facilities: the effects on distribution channels, standardization, permitting sales by auction and, finally, the effects on prices of networking centres of production and consumption into a single unit, and introducing the concept of individual market units instead of an overall national scheme. The characteristics of the MINs are that they are closed markets with controlled entries and exits, located on main roads and/or railway lines, and equipped with cold storage facilities and other complementary services.

For the network to be set up, a census of all markets with an influence on food prices at national level was carried out, and a study was made of the profitability of their installations and their low impact on product prices (4 percent of product value).

In 1962, the Federation française des march s d’interêt national (FFMIN) was created as an association based on the Law of 1901, with the purpose of developing the MIN network, co-ordinating it, informing public authorities of the problems affecting the markets and proposing solutions, developing a common management policy and defending the common interests of its members. This federation, which is permanent and has headquarters in Lyon, has the following activities: meetings, information, publications, lectures and the organization of congresses and conferences. It is funded by subscriptions, state subsidies and by the provision of services.

Germany

In Germany there are no federal or state laws to regulate the activities of wholesale markets. Wholesale markets are a municipal responsibility, since the installations are owned by the different cities, directly or through companies wholly owned by the municipal authorities, save for a few exceptions which are administered by companies whose by-laws are established by the municipalities and come under public law (the employees are civil servants under public law and the tariffs are set under public law). In most cases the companies are registered as limited companies.

There are still quite a number of major cities with buildings dating from before the Second World War. The most recent structures are those of Berlin, Essen and Karlsruhe. There is no network or federation between the different wholesale markets.

The country’s most representative wholesale market is perhaps Berlin. It has certain features that differ from the rest as regards the form of management. The owner of the wholesale market is a limited company founded in 1960 (Berliner Grossmarkt GmbH, BGG) whose stock capital is wholly owned by the Berlin city-state. It is, however, under private law, although in some cases public law has been applied. It consists of two markets: a fruit and vegetable market and a meat, flowers and local horticultural products market.

The administration and operation of both wholesale markets were transferred to the Berlin Cooperative for the Administration of the Wholesale Fruit and Vegetable Markets. In both markets, the Market by-laws (Marktordnung) established by the BGG, were expanded to incorporate Operational by-laws (Betriebsordnung) and Traffic Regulations (Verkehrsordnung), both issued by the administration cooperative, but with the consent of the BGG, and another set of Tariff Regulations (Geb hrenordnung) issued by the cooperative. The latter has a great deal of power over market governance (approval or refusal of licenses to wholesalers, use and rental of stalls and spaces in the wholesale market, application of penalties, settlement of complaints).

The Market by-laws regulate the market days, opening hours and selling hours, access to the installations and entrance passes. Operational licenses for wholesalers, importers and producers are granted by the cooperative that manages the market. The cooperative grants leases for the use of market stalls, but the rental contracts must be approved by the BGG.

Wholesale market information and statistics are issued by the BGG and the cooperative. The imposition of penalties is governed by the cooperative. Finally, the by-laws establish a system for complaints against measures taken by the cooperative, which are resolved by a Committee consisting of representatives of the BGG, the cooperative, the wholesalers’ association, the chamber of commerce and senators. This Committee may modify, alter and confirm the cooperative’s decisions.

The Operational by-laws, on the basis of the Market by-laws, regulate entry into the market confines, matters of hygiene and cleanliness, alterations and disputes in the market, lighting, cold storage facilities and the railway station.

The Traffic Regulations issued by the cooperative regulate all aspects related to the movement of vehicles within the market in accordance with the established opening hours.

Contracts for the rental of stalls, actually sub-leases, are drawn up between the cooperative (lessee) and the traders (lessors). The lessee acts as the owner of the market stalls by virtue of the lease it holds from the BGG. The cooperative collects the rents, payable monthly. These cover the costs of lighting, general heating of the central alleys and cleaning services.

United Kingdom

There are not many legal rules at national and regional level to regulate wholesale market operations, except as regards food hygiene and product classification. Increasingly, these aspects are regulated by unified rules applicable to the entire European Union.

There is no network, as such, of wholesale markets in the United Kingdom. The most representative of these is undoubtedly London’s Covent Garden, governed by a public authority established by an Act of Parliament in 1961. In 1966, Parliament approved the authority’s decision to relocate the market to a new site, Nine Elms, inaugurated in 1974.

The market authority consists of a President and a Director-General appointed by the Ministry, together with other members, no less than three and no more than six, appointed from the ranks of highly experienced and capable professionals in industry, trade, administration, transport, finance, law and labour organizations.

When required, it can impose restrictions on the use of market installations for certain purposes within the confines of the market and prohibit such uses over a certain radius around the market. It may also grant or revoke licenses for these activities. It must compensate for damages due to certain operations. It has regulatory powers over market activities, transport and the warehousing of agricultural produce.

The market by-laws, subject to ministerial approval, relate to market activities, trade, installations and operations. Before granting approval, the Minister may seek the opinion of other departments. The authority has the power of imposing tolls, charges and tariffs, including entrance fees. The authority has a series of permanent committees: a management committee, a traffic committee and a market workers’ committee. The management committee is chaired by the Director-General and includes other persons appointed by the authority, wholesalers’ and producers’ representatives.

The authority must see to it that income is sufficient to cover its needs. This is its main duty. In some very special cases the Minister may grant cash advances which must be reimbursed in an appropriate manner. Obviously, the jurisdiction of the market authority is limited to the area of Covent Garden in Nine Elms. There is also an advisory market-management committee consisting of a chairperson, a secretary and 18 other members, both for fruit and vegetable products and for flowers.

In 1991, new rates for market occupancy were approved for a nine-year period. One of the subjects of greatest concern is the possibility of using vacant market spaces for other purposes compatible with the sale of perishable goods. In the last few years the trend towards direct sales to supermarkets has led to a decline in the market’s throughput with a decrease in the number of firms operating in the market and a corresponding decrease in occupied space. This was also exacerbated by the increase of license rates in 1991. Vacant spaces were regrouped in a single hall. Management plans were drawn up for the incorporation of other markets in the area such as Borough Market, Spitalfields and Smithfield Meat Market, but the London Corporation opposed this.

Future plans include finding suitable activities that may complement the market using the vacant spaces. The market’s financial situation is now healthy.

The statutory committees are the Advisory Management Committee, the Advisory Traffic Committee, the Advisory Market Workers’ Committee and the Advisory Market Finance Committee. There is also an advisory committee of economists.

Other countries

Japan

In Japan there is a Wholesale Market Regulatory Law (1971), which classifies wholesale markets into three categories: central wholesale markets, local wholesale markets and others (under-scale wholesale markets).

Central wholesale markets are established with the approval of the Ministry of Agriculture in the main distribution and consumer centres. The bodies qualified to establish them are local public authorities, prefectures, cities with more than 200 000 inhabitants and local traders' associations with several years experience. In 1981, there were 89 central wholesale markets in 53 cities, including Tokyo, Osaka and Kyoto.

Local wholesale markets are established with the approval of the Prefect-Governor and have specific surface areas. In 1979, there were 1 868 in existence. Access requirements are not as rigorous as for central wholesale markets. Their regulations must be established in accordance with the Wholesale Market Law.

Other wholesale markets numbered 1 138 in 1978. They are managed by local authorities on the basis of the dispositions in force in each district.

Wholesalers must obtain approval from the Ministry of Agriculture for each market and each product they trade in. In other words, in a wholesale market which sells fruit, vegetables and fish, for example, if the authorization is granted for each market or product category, a firm is allowed to trade in two or more wholesale markets or categories.

There are no wholesale traders’ organizations and traders complain that they are left to their own resources to resolve problems of training and observance of the wholesale marketing laws. There are no information networks, but there is an Association of Central Wholesale Markets of Japan with head-offices in Tokyo’s metropolitan central wholesale market and six district offices in the six district wholesale markets. Its activities are to rationalize the markets, modernize installations, monitor the management practices of the wholesale markets and wholesalers, and modernize distribution and information. The members are the local public authorities that have built or are in charge of wholesale markets.

Hong Kong

Until Hong Kong ceased to be a British colony, the Director of Agriculture was responsible for the administration and management of the three groups of wholesale markets in the territory.

1. Markets established by the Director of Trade: The Cheung Sha Wan wholesale fruit and vegetable market is operated by the traders’ association established as an authority on the basis of the Hong Kong legislation. It is non-profit making and its income amounts to 10 percent of the commissions on the value of the produce. Transactions take place by negotiation. There is an advisory committee. The wholesale market sells mainly local products.

Seven Fish Marketing Organizations (FMO) operate as a corporation established by the Director of Trade, with an advisory committee. An FMO may draft regulations, operates as a non-profit organization and its income represents 6 percent of the commission on sales made by negotiation or auction.

2. Markets established by the Director of Agriculture: Currently there are six wholesale markets, some of which are temporary, and they sell fruit, vegetables and poultry. Market stalls are rented on a daily basis and rents are calculated to cover costs. Entrance fees are charged for vehicles. The Director is not involved in daily transactions, the traders themselves monitoring their own commercial practices in the course of their daily activities. When necessary, ad-hoc management committees are formed which include wholesalers to resolve specific problems.

3. Rural assembly markets: There are five of these selling fruit, vegetables and fish on a private basis in the New Territories.

South Africa

In most countries on the African continent there are still no wholesale markets with modern characteristics as regards their design, installations and complementary operations, due to delays in the development of the marketing practices of perishable products and the costly investments this requires. In this respect, therefore, mention will be made only of the wholesale markets of the Republic of South Africa.

There are currently 15 national markets of perishable goods in the whole country, all of which are owned by municipal authorities. These also appoint the management to provide the market services. There are also other smaller markets that are owned and managed by their respective local authorities.

In South Africa, the legal framework for wholesale markets is national (the Fresh Produce Markets Act, 1970; the Agricultural Produce Agencies Act, 1975; the Marketing Act, 1968). In addition, the authorities of four of the markets lobby the administrators of the provinces in which the central markets are located to promulgate the regulations of their own market. The regulations are made by the authority in consultation with the Commission for Fresh Produce. For the development and building of new national markets, and the replacement of structures considered obsolete, the country’s central Government grants subsidies to the local authorities responsible for market services at a rate of 25 percent a year, as long as the market’s operating losses are at least 5 percent of the invested capital. If losses are less than this percentage, only the real loss is refundable to the authority concerned.

Since 1961, thirteen of the fifteen national markets and two of the non-national markets have been replaced by new establishments in an effort to improve commercial infrastructure. In practice, the national markets of Johannesburg, Cape Town and Pretoria have considerably enlarged their installations to meet the growing demand for space and respond to the requests they receive. The sites chosen for the new markets have sufficient space to cater for the demands of the coming years.

Studies made in 1991 indicated that 63 percent of the fresh produce in the country was sold through the wholesale markets. The products reach the markets by road and rail from the country’]s production zones and are sold by private agreement or by designated “market agents” or brokers on behalf of the producers. Some products are sold by auction (watermelons, melons). In any case product prices fluctuate according to the level of supply and demand, and all sales are made under the supervision of the market authority. Auctioneers employed by the authority and registered with the Ministry of Agriculture carry out the auctions. These auctioneers must deposit a certain amount as a guarantee against possible losses.

The market agents or brokers are remunerated for their services with a commission that can range from 5-7 percent of the gross value of goods sold. These percentages are fixed by law and are the highest rates that can be charged.

The Law of 1975, replaced by a new one in 1993, regulates the sale of fresh produce by brokers or other agents. It defines the broker as a person who, against a commission, sells produce on behalf of another person and exercises control over the products and/or selling procedures for the latter.

The Law 82 of 1975 established the Commission for Fresh and Perishable Produce whose purpose is to advise the Minister on all matters related to the market. It consists of three or four members appointed by the Minister. It also establishes the payment of market fees.

United States of America

The Maryland Food Center in Baltimore, which dates from 1989, is the latest large wholesale market to have been built in the United States. The decree of the State Assembly General which instituted the Food Center Authority explicitly recognized that food marketing is a matter of public interest, and also recognized that the maintenance of market structures is a public function.

In view of the fact that the obsolescence of installations in the State of Maryland was causing high food marketing costs, the State Assembly decreed the creation of a Market Authority as a public corporation, whose function would be to purchase the land, build and operate a new food center.

The Market Authority is a political and corporate body created as an instrument of the State of Maryland with a broad range of responsibilities which include purchasing, maintaining and disposing of property and assets, drafting all types of contracts and leases for market stalls, and fixing fees and rents for the use of the installations. These rates are calculated in such a way as to obtain maximum income and are not subject to supervision or regulation on the part of any other State commission or political department as long as the Authority exists.

The Authority owns and operates the different central markets in the region. It has an Advisory Committee with the function of advising the members of the Authority from time to time. The Authority generally consults the Committee on matters having to do with wholesale market operational procedures and the latter, accordingly, makes suggestions and recommendations to the Authority before it makes decisions but these are not binding on the Authority.

As regards wholesale market operations, the Authority charges fees for the entry of vehicles and for issuing buyers with entry papers. It regulates the entrance of persons (wholesalers, market staff, buyers and producers), indicates the various parking zones and establishes cleaning hours.

Five-year contracts are established between the owner/lessor and the user/lessee for the stall and all its annexes, but this does not grant exclusive use of the loading and unloading bay, nor of the areas that are common to all exhibitors. Lessees are given the opportunity to renew contracts for three years at the same conditions but with a slight adjustment of the price.

Wholesalers elect an Advisory Committee (7 members).

Australia

“Central markets” are the most important markets as regards the concentration of goods produced in a region and where large quantities of produce are redistributed. In Australia, there are large central wholesale markets in Sydney, Melbourne, Brisbane, Adelaide and Perth. The Brisbane market is the only large public wholesale market. It is a public wholesale market established by the State Government in accordance with the City of Brisbane Market Act. It is managed by a Trust which is ultimately responsible to the Minister for Primary Industries. Under the Act wholesale marketing in the Brisbane area can occur only at the Brisbane market. It is located 11 km from the centre of town and has a surface area of 53 hectares.

The Brisbane Market Trust, which is a legally appointed statutory authority, manages the market as required in legislation. It operates in a manner similar to a company’s board of directors, establishing policy and taking the most important decisions. The day-to-day operations are carried out by the General Manager and the staff employed by the Trust under the advice of the Chairman of the Board. There are also a number of subcommittees of an advisory nature as regards certain specific matters. The Trust has 30 employees. It keeps daily records of goods entering the market by collecting manifests at the entry gates. Goods arrive by road, rail and sea.

The Act gives the Trust the power to establish by-laws for the regulation, management and government of the wholesale market. The Department of Primary Industries has final responsibility for approval of fees and rules but coordination is facilitated by representation in the Trust Board. The Department has the responsibility to license wholesalers especially those acting as commission agents. This system is under review, having been introduced to provide some protection to growers consigning produce from considerable distances from the market, at a time when communications were not as sophisticated as they are now.

Leases within the wholesale market are established by rental contracts: for market stalls (10 years, with two options of 5 years each) and shops (5 years, with another 5-year option). Land lease contracts have also been established for those wishing to build ad hoc premises. These are over much longer periods in order to allow the amortization of assets invested in the buildings, which become Trust property at the end of the lease. Commercial and office premises are rented under shorter contracts, of three to nine years.

There are wholesalers’ and retailers’ associations.

Argentina

The Republic of Argentina is developing, in broad terms, a system based on the French model of the MIN and the Spanish model based on MERCASA. In 1967, the Buenos Aires Central Market Corporation was created by the Ministry of the Interior and the Economy, in partnership with the Provincial

Government of Buenos Aires and the Municipality of the City of Buenos Aires. It had a legal framework for the planning, building and administration of the Buenos Aires central market as the single wholesale market in the city.

The Law 19.227 on Mercados de Inter s Nacional (Markets of National Interest) of 9.9.1971 and its Regulatory Decree 3872/71 are aimed at the creation of a MIN network, operating as a public service. A market may be appointed as a MIN when it plays an important part in inter-regional trade. The MIN are considered public services. Management may be sub-contracted to outsiders as long as the producers have an adequate participation in the marketing process.

There is a specified area over which it is possible to prohibit the building, restructuring or transfer of wholesale markets for four years. There is to be a protective perimeter established for a period of 20 years (extendable) from the opening of the market to prevent the establishment of wholesale activities in the same branch as the MIN. In addition, retailers are obliged to purchase their supplies in the MIN.

The concessionaire of a MIN enjoys certain advantages, such as credits, land purchasing rights, technical assistance and protective perimeters.

The internal by-laws formulated by the Executive Council should establish: hours of business, minimum quantities, sales systems, conditions and obligations for participants, assignment by tender of market stalls, access to the market confines, level of rents, fees, deposits and guarantees, inspection of installations and internal traffic regulations.

The Executive Council must set up an information system in order to record market arrivals and prices. Such information can contribute to the orientation of producers, the efficient distribution of food supplies in the country and inter-market collaboration. This implies the introduction of a system for the grading of products and the standardization of packaging.

The incorporation of other markets into the public service scheme is possible when such markets are sufficiently important at an inter-regional level, in that the products traded come from regions other than those in which they are consumed, when their transactions influence the pricing of product at national or regional levels and when they attract major regional operators. In such cases markets are declared to be of public utility and may be expropriated. The Government then appoints a managing authority for the concession.

Markets may also be incorporated which operate without the physical presence of the produce if no MIN operates in the area, as long as the products themselves are well enough graded, producers are present in the governing bodies of the market, the market administration guarantees the operations taking place and these serve to promote exports and the placing of produce on the internal market.

The by-laws should regulate sanctions applicable to users and concessionaires. Finally, they recognize the Central Market of Buenos Aires as a MIN, with the Buenos Aires Central Market Corporation as its concessionaire. Its confines are established by an administrative agreement between the Nation, the Province and the Municipality.

The Decree 3872/71 states that the governing body is the Ministry of Industry and Trade without prejudice to the Ministry of Agriculture. Together they appoint the MIN, define their protective perimeters and appoint the members of the Executive Council. The Ministry of Agriculture grants the concessions and licenses, approves the standard internal by-laws and those of each market, and receives information.

The governing body creates the MIN Executive Council and inside each market there is also an Executive Council. The Corporation is directed by a Board of Directors, which includes representatives of the private sector. The stock capital is jointly owned by public and private entities. It is exempt from all taxes. Within the market, the Corporation exercises all the functions required to achieve its objectives, including monitoring the supplies and hygiene.

Through complementary administrative agreements, the public authorities govern the application of the market’s by-laws, its organization and the allocation of stalls, and manage the Corporation’s resources.

The authorities are responsible for the Corporation’s operations. Currently, the Corporation does not manage the market’s funds or control income and expenses. Basically, it administers the allocation of market spaces, carries out quality controls, keeps price statistics and organizes market security and cleaning services. It does not intervene in commercial operations. The wholesale market was inaugurated in 1984 and in 1987 the fruit and vegetable markets, that were closed on that occasion, resumed their operations.