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Supermarkets face competition enquiry

[Tuesday 09 May 2006]

BRITAIN'S supermarket chains are to face a major investigation by the Competition Commission.

The Office of Fair Trading (OFT) has published its review of the UK grocery sector and, in a move that will delight countryside campaigners, has concluded that a market investigation is now necessary.

Supermarkets now face competition enquiry
Supermarkets now face competition enquiry

Environmental group Friends of the Earth have welcomed the OFT decision, calling it a boost for small, independent retailers and farmers. Supermarkets Campaigner Sandra Bell said: "Time is ticking for our high streets and farmers. The Competition Commission must start its investigation without delay.

"Radical solutions are needed to deal with these problems. The power of supermarkets needs to be challenged. The Commission should consider selling off stores and land if it is to create a level playing field in the retail market. And suppliers must finally be given genuine protection against the bullying tactics of the supermarkets."

The decision comes after a period of public consultation, which followed the OFT's earlier proposal to refer the grocery market to the Competition Commission on 9th March this year.

During the consultation, over 1,200 responses were received from businesses, consumers and other interested parties, the majority of whom supported the OFT's decision. Having considered the views of respondents to the consultation, the OFT has concluded that there are a number of competition concerns that warrant a full investigation by the Competition Commission.

Evidence compiled by the OFT suggests that:

  • The planning regime acts as a costly barrier to entry, making it difficult for new stores to open and compete with those already in the market

  • Big supermarkets have significant land holdings which could aggravate barriers to entry or otherwise harm consumers

  • In some instances, supermarkets have attached restrictive covenants when selling sites

  • There is also evidence to suggest that the big supermarkets' buyer power has increased, and that some aspects of their pricing behaviour - such as below-cost selling and price flexing - could distort competition.

John Fingleton, Chief Executive of the OFT said:

"This reference will allow the Competition Commission to examine in detail all aspects of the grocery sector, ensuring that consumers are able to benefit from strong competition through even lower prices, improved quality and choice, and continuing innovation in the market."

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