After 18 months travelling the country, sifting through millions of emails, sending out surveys, travelling the country and listening to submissions, the Competition Commission is expected to publish the provisional findings of its grocery market inquiry next week.
There are three key areas on which the inquiry appears to be focused: how retailer and supplier activity impacts on customers; how fair the retailers are to suppliers; and how the current planning system affects competition in the marketplace.
So what are the likely findings? Based on the working papers of the inquiry, independent competition lawyers, and sources close to the inquiry, it seems unlikely the multiples have much to fear.
The Commission has rejected the ACS's waterbed effect theory, whereby smaller retailers pay the price for discounts offered to multiples. And while it is understood to have shifted somewhat its position on the number of independent c-stores, having earlier used Experian Goad data to suggest that numbers are increasing , it does not believe that consumer choice is at risk as a result.
The multiples' landbanks are also likely to be left alone , according to one competition lawyer. Although the Commission has flagged landbanking up as potential barrier to entry, it has not found evidence of a multiple deliberately hanging on to sites to prevent a rival building on it. It is likely to recommend the government helps local authorities run the planning system more fairly , he adds.
Concerns with the Code of Practice will almost certainly be addressed, on the other hand, with attention likely to be paid to retrospective pricing and contracts and other retailer supply terms. Although the commission is unlikely to suggest remedies at this stage, competition experts have called for it to be more creative than simply closing loopholes .
"The Commission does not want to be back here in four years time addressing the same issues," says the lawyer. "What it needs is a system of enforcing the code that doesn't rely on complaints. By appointing an adjudicator, the Commission can take responsibility for ensuring it works."
James Lowman, chief executive of the Association of Convenience Stores, is also confident the Commission will deliver some good news for smaller players.
"The needle is beginning to swing slightly in our favour," he says. "There is ample evidence of supplier discrimination against smaller players in terms of price and availability.
"The more you look at the relationship between supermarkets and suppliers, the more ineffective the code looks."*** grocery prices ***
Tightening Code of PracticeEvens
Recommendation to appoint
an enforcement adjudicator
for the Code5/1
Regular monitoring of
future landbanking 8/1
Inclusion of processors
in the Code of Practice10/1
Expansion of definition of 'choice' under needs test12/1
Formal written contracts
for all suppliers16/1
Inclusion of M&S, Waitrose
and other multiples in
Code of Practice33/1
Abolition of needs test100/1
Ban on vouchers250/1
Forcing Tesco to sell off
its convenience stores500/1
Ban on below-cost selling1000/1
*** THIS IS NOT A VALID RECEIPT ***
please call againBets on
Code of Practice. Most likely issue to be addressed by the Commission, having found practices such as retrospective discounting by supermarkets have continued. Wording will be tightened to eliminate ambiguous use of the word 'reasonable' and with greater emphasis on written contracts.
Farmers. Although they have suffered, the Commission says that's due to other factors besides supermarket actions such as changes to CAP, food safety, welfare, and actions by processors, who may now be included in the code.
Landbanks. Tesco has disputed it, but the Commission has identified a "pattern of behaviour consistent with the strategic holding of land to prevent rivals entering areas of strength", and says Asda and Sainsbury's do not engage in similar practices. Rules to prevent future stockpiling of land are more likely than forced disposals, however.
Buying power. The 'waterbed' effect has been dismissed, but the Commission found the differential between prices for goods paid by multiples and independents has widened to 13% since 2000. Bets off
Below-cost selling. To assess use of this at local level, the Commission examined entry and exit of c-stores as a result of a new supermarket. Using hotly disputed figures, it claims the number of independent c-stores rose between 1999 and 2006 - but it is understood to be re-examining the use of the Experian Goad data.
Planning needs test. The Commission will not champion Asda and Sainsbury's call to abolish it. Says evidence from Scotland, where there is no needs test, shows it is not an obstacle to expansion.
Vouchering. Tesco says it uses vouchers 'de minimis'. Sainsbury's counters that Tesco spends more on vouchers in a year than it spends on national TV ads. The Commission says it has no evidence to indicate vouchers were issued with any intention beyond normal local competitive behaviour. The ACS, the Proudfoot Group and Harry Tuffins beg to differ.
Waterbed effect. Despite the 13% price differential identified by the Commission in its first working paper, it believes various arguments surrounding a waterbed effect are overstated.