The Competition Commission this morning (30 April) announced a swathe of measures designed to curb the power of the UK’s largest supermarkets and improve choice for consumers.
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In its long-awaited report into the grocery market, the CC proposed the establishment of an ombudsman to police the relationship between suppliers and retailers and new planning restrictions to promote competition between retailers.
The report marks the conclusion of a two-year investigation into the UK’s supermarket sector.
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By GlobalData
“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,” CC chairman Peter Freeman said as he unveiled the inquiry’s findings.
Responding to calls to protect the interests of suppliers, the CC said that the new supermarket ombudsman would oversee the implementation of a stronger code of practice.
The new body will investigate complaints made by suppliers against retailers.
The CC also said that the ombudsman should have teeth – in the form of the power to “levy significant financial penalties” on supermarket groups if they fail to comply with its findings.
Throughout the investigations, supplier groups claimed that food producers were wary of complaining about supermarkets’ abuse of power because of fears of reprisals. The ombudsman will therefore accept confidential information about retailers.
“Retailers with good practices and relationships should have nothing to fear,” the regulator said.
But the UK’s large retailers have not universally welcomed the new body.
Asda boss Andy Bond warned that the cost of setting up and running the ombudsman could be passed along to consumers at a time when food inflation is already hurting their wallets.
“The commission’s proposals on the new code and an ombudsman could cost the industry hundreds of millions, leading to higher prices for customers which will hit families hard at a time when they are already feeling the pinch,” Asda chief executive Andy Bond, said.
The proposals would also see new powers given to the Office of Fair Trading, which would be consulted on all plans to build large supermarkets or extend existing ones. The OFT would then apply a ‘competition test’ before approval was granted.
Retailers who do not already have a store in the area or where consumers have a choice of four or more different chains, will pass the competition test, the Competition Commission said.
“Although, in many areas, there is good choice and strong competition between retailers, there are also a significant number of local areas where larger grocery stores face limited competition and local shoppers lose out,” the Competition Commission said.
While the Commission stopped short of requiring retailers to sell their so-called ‘land banks’, the CC did insist that the supermarkets would be unable to enforce restrictions on the uses that land is put to after it is sold.
“The CC is not requiring any divestiture of stores or land holdings or any action by the retailers in respect of their leasing or subleasing of stores,” the report stated.
The CC proposals failed to address the concerns of independent retailers, who claim that they are being pushed out of the market by the pricing power of the large multiples.
Consumers were benefitting from the intense rivalry between stores and smaller shops were “not in terminal decline,” the report concluded.
“It is not impossible for them to compete and in the current economic climate the benefits of vigorous competition are as relevant as ever,” the report said.
