The major supermarkets have rubbished claims that their buying power results in smaller retailers paying higher prices and could ultimately lead to the downfall of the wholesale sector.

Tesco says in making its submission that evidence for the 'waterbed' effect, the idea that large supermarkets use their buying power to obtain better supplier terms to such an extent that suppliers are forced

to charge higher prices to their other customers, is "so insubstantial as to be worthless".

The retailer adds: "We believe that many of our suppliers become better able to supply other retailers at competitive rates as they become more efficient

and can benefit from economies of scale."

Asda says the model is "without theoretical foundation or empirical support" and Sainsbury's says there is no evidence it exists.

Tesco, Asda and Sains­bury's also say there is no evidence to support the 'tipping point' theory based on the idea that as supermarkets open c-stores and supply them through their own supply chains, and cause the closure of small independent shops, the wholesale market will become ­unviable and eventually break down.

Asda says that the wholesale market is growing and profitable.

But John Murphy, director general at the Federation of Wholesalers, claimed the retailer's figures related to 2004 - and growth in the wholesale sector had slowed markedly in 2005, according to IGD estimates.

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