Once again the Competition Commission has promised to turn the screw on suppliers as it mounts another bid to uncover evidence of a 'waterbed effect' in grocery.
The Commission, which has been under pressure to reconsider its position on whether the effect exists, has promised in a letter to main parties in its ongoing groceries inquiry, to "strengthen" its analysis of payment terms between suppliers and customers.
Having received only 15 usable responses from suppliers, it has pledged to: talk to more manufacturers; "ensure" they supply comprehensive information; and cross-check the information they supply with data from grocery retailers.
It is the strongest sign yet that the Commission is prepared to wield its far-reaching statutory powers to force companies to open their books to the inquiry team - a threat it insisted as long ago as last October would be unnecessary.
The news will delight wholesalers and independents who have been telling the Commission they believe big multiples use their buying power to squeeze suppliers, who in turn demand higher prices from smaller customers to make up lost margins. They were dismayed when, in its Emerging Thinking in January, the Commission said: "Detailed pricing evidence we have reviewed from 15 suppliers of major branded products does not indicate that the larger grocery retailers systematically obtain lower prices from their suppliers than smaller retailers or wholesalers."
The FWD and the ACS claimed the Commission's analysis was based on too small a sample of suppliers.
In the letter, inquiry director Andrew Taylor admitted that although its original request for details of payment terms was sent out to 40 suppliers, it received only "15 usable responses" ahead of Emerging Thinking. "In some cases data from other suppliers was not received either in time or in a format that allowed it to be used," he wrote. "In other cases we are continuing to follow up our original data request."
Taylor said he believed the analysis to be "reasonably robust". The data collected from the 15 companies covered 70 SKUs representing £1.5bn in retail sales every year - 1% and 2% of the total grocery market.
But as part of the next phase of this work, the Commission "will revisit this issue with suppliers to double-check that the data supplied to us is exhaustive. As we seek to expand the sample, we will ensure that the pricing data supplied to us is provided similarly inclusive of all fixed payments/discounts. To the extent possible, we will also be seeking to cross-check this information with data from grocery retailers."
Where previously the inquiry looked at the extent to which lower prices for large multiples could be explained by volumes, the Commission will now look in more detail at "the extent to which lower prices are related to cost of supply".
The letter, dated 15 March, also revealed the Commission will examine why its inquiry in 2000 uncovered evidence that large retailers received better terms than smaller rivals while its current inquiry had not, so far, done so.
But it warns that in two recent food industry merger inquiries, the Commission reached findings on this issue similar to those in Emerging Thinking.