The Tracing Paper

Not a supermarket

Early reporting on today’s long awaited publication of the provisional findings of the Competition Commission’s 17-month (and counting) investigation into the groceries market gave the impression that the Commission (CC) had given the major mulitiple retailers a clean bill. “Competition inquiry to reprieve supermarkets” pronounced the FT.

There is real criticism of supermarket practices in the CC’s provisional findings, with suggested remedies that might just tackle some of the problems. But the CC also suggests changes to the planning system which would be nothing less than a bonanza for the larger retailers and spell further disaster for town centres and the small independent operators.

Uncompetitive Features

Read the report and you’ll find the CC stating clearly that “there is an adverse effect on competition”, identifying a number of uncompetitive “features” (a sanitised expression for damaging practices) of the market:

• “A significant number of local markets have high levels of concentration, and these high levels of concentration have persisted over a number of years”
  ie there are “Tesco Towns” (and Sainsbury suburbs etc) whose inhabitants suffer from a lack of choice of food shops
• “The control of land in highly-concentrated local markets by incumbent retailers acts as a barrier to entry”
  ie the supermarkets are in possession of landbanks that restrict the development of competing stores
• “the exercise of buyer power [...] through the adoption of supply chain practices that transfer excessive risks and unexpected costs to [...] suppliers [...] prevents, restricts or distorts competition”

ie the supermarkets do treat some of their suppliers unfairly

These are strong criticisms and bear out accusations that the supermarkets have repeatedly denied. Continue Reading »