Tesco has just announced a 13% rise in full-year underlying profits to £2.55 billion. This comes in the wake of an investigation begun last year by the Competition Commission into the powers of the larger superstores and the practices that they operate to grow their market share (see previous stories in Knowledgebase).
The Forum of Private Business (FPB) amongst others is calling on the Competition Commission to produce recommendations with ‘real teeth’ in its groceries market inquiry. Tesco currently holds over a third of the grocery market in the UK. It is Britain’s biggest retailer and has been dubbed ‘The King Kong of the retail jungle’ by the FPB.
The FPB’s Chief Executive, Nick Goulding, says the groceries market report must be able to prove that the continued rapid growth of supermarkets such as Tesco is achieved by fair methods and not by an abuse of power.
"The Competition Commission must answer the question of whether King Kong Tesco is playing by the rules. We know that smaller retailers in this sector are struggling because of the influence of their larger competitors. The buying power of the supermarkets allows them to squeeze suppliers; the financial clout of the supermarkets allows them to bully planning committees and hog more than their fair share of land and the aggressive pricing tactics of supermarkets undermine the profitability of their competitors," said Mr Goulding.
He challenged the Competition Commission to produce a credible report that would address the problems being experienced by the supermarkets’ smaller competitors. However he warned that so far they had not done so:. "By failing to guarantee the anonymity of those suppliers or competitors of the supermarkets who are giving evidence to the inquiry, the Competition Commission has completely compromised it. Some protection must be given to those businesses giving evidence who will have to face the backlash of the supermarkets if their identity is revealed."
So far the Competition Commission has said it will ‘consider’ the issue of anonymity, but to some this is hardly the reassurance that businesses need.
The Commission is set to publish preliminary findings in June, with a final report due in November.
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