The Federation of Small Businesses has said that it was “shocked” at the OFT’s position that the supplier-retailer relationship did not form part of the basis for the watchdog’s referral of the sector to The Competition Commission for investigation.

John Fingleton, chief executive of the OFT, was reported to have said that he was prepared to see suppliers squeezed out of business by retailers, so long as savings were passed along to the consumers.

On Monday (15 May) Corinne Gladstone , an OFT spokesperson, clarified the Office ’s position to just-food. The decision to refer the sector to the Competition Commission, Gladstone said, was the consequence of evidence of land banking practices, not supply chain issues. “The OFT is a consumer body,” Gladstone explained, “we have to keep within our remit.”

However, an FSB spokesperson told just-food, the Federation believes that the relationship between retailers and suppliers has a direct impact on the service available to consumers. “Consumers aren’t only interested in getting the lowest prices – they also want to see local quality produce in stores,” the FSB said.

Clive Davenport, FSB National Trade and Industry Chairman, suggested that Fingleton’s comments demonstrated “a terrible lack of understanding of what is going on in the grocery market.”

“His view that consumers only value price and do not look at product quality, local produce or service quality is misplaced.  Effective competition always takes in more factors than just cost,” Davenport continued. “Supermarket suppliers suffer from late payment of invoices, unilateral changes to contract terms and payment below the cost of production.  An effective regulator would be seeking to put a stop to this rather than ignoring it.”

Ultimately, it will be for the Competition Commission itself to determine what is examined in the course of the investigation into the grocery retail sector, which is expected to last two-years.