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News - 26 January 2007

Supermarket inquiry flawed without witness protection

The initial thoughts emanating from the inquiry into anti-competitive practices in the supermarket industry are that the basis for complaint is flimsy. This is largely due to a lack of forthcoming evidence.

According to the The Forum of Private Business (FPB the Competition Commission’s (CC’s) inquiry into the grocery market will be hindered unless anonymity can be guaranteed for those submitting evidence. The inquiry’s ‘Emerging Thinking’ report has not yet reached any conclusions on the use of anti-competitive practices by the supermarkets, but so far has suffered from a poor response from some suppliers asked to put forward evidence.

Peter Freeman, Chairman of the CC and inquiry said, "We have considered the evidence supplied concerning relationships between grocery retailers and their suppliers. Whilst these haven’t indicated widespread problems in the supply chain, there are still concerns,. He continued, "We have some concerns about farmers and we have not received as much specific evidence about unfair treatment of suppliers as we might have expected."

The FPB’s Campaign Manager, Victoria Carson, believes that is because there has been no clear message guaranteeing anonymity for those suppliers, who fear a reaction from the supermarkets.

"Mr Freeman has said today that "requests for confidentiality will be taken on board", but this is by no means a guarantee. An effective inquiry must ensure that sensitive information is dealt with in a way that will not impact on the businesses supplying it."

Mr Freeman also stated that: "We have found that bigger buyers do not always appear to get better terms from suppliers."

Ms Carson said, "It appears the Competition Commission has missed the bullying evident in the supply chain. Large retailers are abusing suppliers by changing terms of payment mid-contract, in the knowledge that their suppliers cannot afford to say no."

The report has stated that the CC is still looking at the ‘waterbed effect’ – supermarkets driving down the prices of their suppliers through their buying power, which forces suppliers to raise prices for other smaller retailers – and the focus will now shift towards the competition between retailers at local level.

That has been welcomed by the FPB. Ms Carson believes that independent retailers are facing a difficult future unless something is done. “The underhand tactics of the big boys are destroying competition in retail as a whole. Small shops are closing, high streets and local economies are suffering. The grocery market inquiry must be the first investigation of a wider campaign to create an even playing field for all," said Ms Carson.

The report has concentrated on finding out the facts about supermarkets’ land holdings, their purpose and how the planning systems affect retailer development. It has found that Tesco holds most land, but other retailers are actively increasing their holdings.

Ms Carson, said that more than 300 land bank sites existed in the UK and that they prevented other companies competing in local markets.

"Retail giants are using their financial muscle to prevent rivals gaining access to markets. At the same time, businesses around the land banks are suffering as a result of a lack of investment and maintenance of those areas because the supermarkets often wait significant periods of time before developing them."

Ms Carson wants the land banks to be closely monitored.

Meanwhile the Federation of Small Businesses (FSB) welcomed the Competition Commission's pledge to examine competition at local levels, but warned that it should not shy away from tough measures if they find that competition is unfair or that planning laws are being broken.

Clive Davenport, FSB Trade and Industry Chairman, said, "We have serious concerns about reports of blatant abuses of the planning system by supermarkets, which the Competition Commission has failed to address in numerous inquiries in the past. This time round no stone should be left unturned and offenders should be brought to book.

"Independent retailers cannot compete for goods if supermarkets sell them to the public at lower prices than independent retailers can buy from wholesalers. This is unfair competition and should be stopped.

"However, we welcome plans to look in more detail at competition at the local level. Independent retailers have a lot to offer in terms of local products, personal service and consumer choice.

"Unfair or illegal competition is not acceptable and it is essential that the Competition Commission does its job properly to stamp it out. On the evidence of today's initial findings, it does not look promising."

Read related items on:
Retail, pubs, clubs and restaurants
Federation of Small Businesses
Forum of Private Business
Carson, Victoria
Freeman, Peter

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