The Competition Comm-ission kept the Post Office busy again this week with another mail out to supermarkets. Just a whiff of the official postmark sets the adrenalin coursing through the veins of the industry and its media sideshow. But for all the hysteria, the lookout for the supermarkets is no different at the end of this week than it was last. Nobody close to the inquiry can be unaware of the Commission's powers ­ and that basically was the sum content of the letters. Anyway, just because it can do something, doesn't mean it will ­ although shares in Tesco and Sainsbury dropped 5% nonetheless. As the Commission pointed out, it has not yet reached any decisions. It is usual practice, it says, to spell out hypothetical' remedies "before the Commission has reached any public interest conclusions in an inquiry". But what has surprised some is the detail. The letter floats remedies for resolving competition issues, including divestment of stores; pricing issues, including the prohibition of loss leaders; and measures to improve relations with suppliers, including a new code of practice possibly marshalled by the Office of Fair Trading. But that just skims the surface. The document has fuelled suspicion that the Comm-ission wants to get shot of the inquiry. It is, after all, in a difficult position. The Comm-ission does not operate as an offshore political island. Whatever it recommends will have to be palatable to this keen-to-be-seen-as-business-friendly government. The watchdog has already acknowledged its failure to detect excess profits ­ and neither it is likely to. The sector has seen a relative decline in return on capital for the last five years ­ not just the two since the investigation began. So what can it do that will neither restrict commercial freedom ­ bearing in mind that if you remove from managers' hands any elements of the marketing mix, you restrict their ability to compete internationally ­ nor lead to price hikes in store? Few of the medicines in the chest fit the bill. Analyst David Stoddart of Investec Henderson Crosth-waite is not impressed. "A lot of these at the moment are pretty vague, but the political consequences attached to how you make them work are massive. At this stage it's not a million miles away from prices being set by the State. Nobody wants to go there." The five supers still in the frame ­ Tesco, Sainsbury, Asda, Morrisons and Safeway ­ will have a chance to put their case at the inquiry sessions next month and in April. Few realistically expect a rash of sale boards on superstores across the country. Enforced divestiture is too tricky. Who would compensate retailers, staff and even customers? Does your average Sainsbury shopper relish the thought of a dash round a discounter? And few retailers want to be locked in to the kind of prices paid for many of the top firms' premium sites. But Safeway for one has not ruled out some action to tackle local dominance. Other options exist, including linking prices to costs ­ how to police it without evoking comparisons with the Soviet system is troublesome ­ although the Commission has effectively ruled out any enforcement of national pricing. Many believe the remedies letter will come to nothing more concrete than the publication of prices for consumers ­ this is already in evidence on some of the web sites ­ and a code of practice formalising relations between retailer and supplier written by a trade body. The Commission always had it in mind to do something for small suppliers. But policing will be tricky. And which supplier is going to blow the whistle on a customer if that customer represents 40% of their business? {{NEWS }}

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