Supermarket Probe by Competition Commission

The UK's big four Tesco, Asda, Sainsbury's and Morrisons now account for more than three-quarters of the grocery market, prompting the Competition Commission to begin its latest investigation into the market for groceries. From 1999, the Competition Commission asked by the OFT, started a near decade long investigation into the supermarket industry and complaints that small suppliers are struggling under them. In 2001, a Supermarket Code of Practice was made by CC to keep supermarkets behavior in check. However three years on, the OFT concluded the code is "not working effectively". The commission was worried and has now concluded that there were aspects of the grocery market that prevented or restricted competition.

For example not only does the ‘big four’ as it were dominate nationally, as the commission found the supermarkets market is being made increasingly uncompetitive when certain retailers hold on to unused land in order to prevent others from setting up shop nearby. These ‘restrictive covenants’ as they are known act as a barrier to competition in those areas. With this final report the competition commission wants to make sure you the consumer have a number of big supermarkets to choose from in your local area. The Commission had identified 200 locations where more competition was needed. It said a lack of competition "not only disadvantages consumers in those areas but also allows retailers to weaken their offer to consumers nationally".

As a supermarket shopper, the Commission says you are getting a good deal but it is looking to act the problems associated with the supply commission is preparing to appoint a dedicated ombudsman with tough new powers to protect farmers and suppliers from exploitation by supermarkets. Following the commissions final report it would appear that although the commission testament that by and large condition for the average consumer were still good, in various areas across the country some customers were still getting a raw deal in that there still very few places to shop with the effects of the aforementioned restricted covenants still playing a major role in preventing adequate competition, whilst as shown by the graph smaller independent retailers are still being driven out of the market. The CC stated that supermarkets could be blocked from opening a new store if they already have an outlet within a 10 minute drive, or if it would give them control of 60% of sales in the area. However this only applied to supermarket stores over 1,000 square meters. This gives supermarket chains to set up as smaller high street stores again being detrimental to competition.

I would agree with small retailers, environmental and consumer groups such as Friends of the Earth in their lack of support for the CC’s decisions. This is because they are working ineffectively and failing to identify ways in which to solve problems. In addition, they are not firm enough on these supermarkets to abide by their rules. They are clearly ineffective as through the course of 9 years, they were unable to find the causes or find remedies for this problem. The laws they implemented still did not change the way supermarkets behaved and did not follow this up with further investigations or some sort of punishments, emphasizing their laid back approach to these supermarkets.

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