Competition report takes on supermarkets
Supermarkets face new competition rules
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Wednesday, 30, Apr 2008 12:01
The Competition Commission's (CC) final report into the UK grocery market has recommended several changes to rein in supermarkets.
The report, which follows a five-year investigation with over 700 submissions, puts forward the regulator's final recommendations.
The big four grocers - Asda, Tesco, Sainsbury's and Morrisons - have been accused of buying up land to prevent rivals opening nearby and using their buying power to set unfair prices for suppliers.
Last October, the CC published a report outlining its concerns about competition in the sector, which included fair prices for suppliers and land banks.
Today, the watchdog said it is appointing a supermarkets ombudsman to oversee the sector.
Potentially, the ombudsman could have the power to fine retailers if they are found to abuse their suppliers.
In addition, a new strengthened and extended Groceries Supply Code of Practice (GSCOP) has been introduced.
The regulator also said, although it would not take any action on land banks, it will take action on exclusivity arrangements and restrictive covenants being used by retailers to restrict entry by competitors.
Peter Freeman, chairman of the CC, said: "In many important respects, consumers are receiving the benefits of competition, such as value, choice, innovation and convenience, but we need to take appropriate action to address those areas where they could be served better and where their interests could be damaged in future.
"The changes to the existing code of practice, along with the recommendation of an independent ombudsman to police the code, aim to improve the existing system by making it more robust and proactive in tackling those practices which can damage investment by suppliers."
However, the Campaign to Protect Rural England (CPRE) believes the proposed changes do not go far enough.
"The commission has been narrowly focused on competition between the big retail giants. It looks set to do nothing for the small shops and independents being squeezed out of the market by the big four," said Graeme Willis, local food campaigner at CPRE.
"To prevent market domination the commission is expected to propose a local competition test. But this wouldn't stem supermarket expansion and the further erosion of the character and vitality of our town centres."
The CC said that while it was sympathetic to the plight of independent retailers, "evidence does not show that independent retailers or the wholesalers that supply them are in terminal decline".
More recently, the supermarkets have been accused of price fixing by the Office of Fair Trading (OFT) on a wide range of products, including dairy, tobacco, and branded health and beauty and food items.
The CC acknowledged the investigation but said "it would be quite wrong to jump to any conclusions on this at this stage".