OFT says evidence shows market working well; it needs proof to the contrary
The Office of Fair Trading has given the industry a final chance to prove that the growing power of the big supermarkets is damaging competition in the grocery sector and limiting consumer choice.
Publishing its long-awaited report on the supermarkets code of practice this week, OFT chairman Sir John Vickers said he would give the industry until May 31 to provide evidence on issues related to the code that had come out of its review.
But he also acknowledged there were concerns about some wider competition issues, such as the acquisition by big retailers of c-stores and the effects of below-cost selling.
The OFT claims that all the available evidence suggests the grocery market is working well for consumers and needs proof to the contrary. It also said that competition law could not be applied to the social and economic impact of the growth of the big chains - that was the job of government.
Nevertheless, the OFT invited the industry to comment on these wider competition issues. And Sir John said: “We are keen for further evidence to inform our continuing scrutiny of the supermarket sector.”
The news was welcomed by David Rae, chief executive of the Association of Convenience Stores, who said it was an opportunity for the convenience sector to prove its case.
“The OFT’s report could have simply said that the code of practice is working and that there was no need for a review of the convenience market.
“It didn’t, so we will continue the process that we have already started. We believe that with the evidence we have produced with Surrey University, and other research we are conducting, we can produce a strong case for a review.”
But Rae also warned that the OFT report would frustrate c-store retailers who have been lobbying the OFT for more than two years to take action on the consolidation of the market.
Jerry Marwood, MD of Spar UK, urged retailers to do what the OFT was asking and provide their buying and wholesale groups with as much evidence as possible to instigate a review.
The Federation of Wholesale Distributors said the OFT had missed an opportunity to protect consumer interests and retail diversity by imposing a moratorium on acquisitions.
Director general Alan Toft said: “Merely giving the industry a few weeks to come up with evidence of anti-competitive trends is not good enough.”
He said the OFT would be invited to send its auditors into wholesalers to compare the prices with those they had checked in the superstores.
Steve Parfett, MD of Parfetts, said: “I believe there is already sufficient evidence for a review, but I support the efforts of the ACS and FWD to prove it.”
Parfett said the government seemed unwilling to intervene: “The unequal terms enjoyed by the multiples leads them to enjoy greater profits, which they can then use to fight their case for the situation to remain as it is. It is a vicious circle and it looks like the government does not want to break it.”
Ronan Hegarty