the oft is not protecting consumers, says Bob Surridge, MD of Anglian Convenience Stores
The Office of Fair Trading is responsible for "making markets work well for consumers". But is it fulfilling this premise or overseeing the biggest disenfranchisement of the consumer in British history?
It has only been a few months since chief executive John Fingleton refused to review the grocery market, so what has changed his mind? In deciding to refer this matter to the Competition Commission he has stated that the market "is evolving rapidly". Has he suddenly seen the light or has it been necessary to shine it in his eyes?
In his recent interview with The Grocer (March 18, 2005) Fingleton insisted that the referral had come from solid economics, not from external pressure.
Call me cynical, but it is strange that the timing is contemporaneous with mounting pressure from nearly every direction - members of the public, trade associations, MPs and so on. Regardless of the fact that the referral appears to have been made grudgingly, we should grasp the opportunity and push home the case for government intervention to protect independents.
For some reason, Fingleton seems to believe that by changing the planning laws to allow more entrants into the market, the problems that we are concerned with - the saving of the smaller independent, the preservation of local communities, consumer choice, employment and so on - will be remedied. How? Most independents and customers are more concerned with an untimely exit from the market rather than restricted entry.
I would like him to focus on the plight of the remaining 26,000 independents and their customers rather than corporate entry into the market - 75% of which is already in corporate hands. We are not just fighting for our survival, but also to protect the long-term interests of the consumer, something the OFT should be doing.
According to the recent OFT report, during the past four years, more than 3,000 small independent stores and petrol forecourts have disappeared, accounting for nearly 7% of the total.
No doubt many have closed because of an inability to compete against the big four, with their huge advertising budgets and buying advantages. There is, however, every reason to suspect that many would have survived if organisations such as Tesco had been prevented from saturating an area with its stores. Clearly, it cannot be in the interests of the consumer for all the competition to be "consumed" by the activities of a colossus, as appears to have been the case in the places mentioned in the report, such as Inverness, Bicester, Milton Keynes, Twickenham, Southall and Hemel Hempstead.
The report goes on to state that in 104 postcode areas of Britain Tesco has in excess of 50% of the grocery market.
Surely it is within the remit of the OFT to force companies to sell stores if they become over-dominant in any particular catchment area as there would be clear evidence of the consumer being harmed by lack of competition.
To call this fair trading is, I believe, stretching the bounds of belief too far. There are undoubtedly short-term gains for the consumer; but in my view, and that of an increasing number of people, the price is becoming too high.
I get the impression from the report, and subsequent comments, that the chief executive of the OFT regards the big four as beneficent, philanthropic organisations that are the answers to customers' needs. Perhaps someone should tell him that these companies exist to deliver maximum returns for their shareholders. As soon as there is no or limited competition, the incentives to take advantage of that position will almost certainly become irresistible.
My hope is that, for once common sense will prevail before the damage currently being wrought on our industry and consumers becomes irreparable.
The Office of Fair Trading is responsible for "making markets work well for consumers". But is it fulfilling this premise or overseeing the biggest disenfranchisement of the consumer in British history?
It has only been a few months since chief executive John Fingleton refused to review the grocery market, so what has changed his mind? In deciding to refer this matter to the Competition Commission he has stated that the market "is evolving rapidly". Has he suddenly seen the light or has it been necessary to shine it in his eyes?
In his recent interview with The Grocer (March 18, 2005) Fingleton insisted that the referral had come from solid economics, not from external pressure.
Call me cynical, but it is strange that the timing is contemporaneous with mounting pressure from nearly every direction - members of the public, trade associations, MPs and so on. Regardless of the fact that the referral appears to have been made grudgingly, we should grasp the opportunity and push home the case for government intervention to protect independents.
For some reason, Fingleton seems to believe that by changing the planning laws to allow more entrants into the market, the problems that we are concerned with - the saving of the smaller independent, the preservation of local communities, consumer choice, employment and so on - will be remedied. How? Most independents and customers are more concerned with an untimely exit from the market rather than restricted entry.
I would like him to focus on the plight of the remaining 26,000 independents and their customers rather than corporate entry into the market - 75% of which is already in corporate hands. We are not just fighting for our survival, but also to protect the long-term interests of the consumer, something the OFT should be doing.
According to the recent OFT report, during the past four years, more than 3,000 small independent stores and petrol forecourts have disappeared, accounting for nearly 7% of the total.
No doubt many have closed because of an inability to compete against the big four, with their huge advertising budgets and buying advantages. There is, however, every reason to suspect that many would have survived if organisations such as Tesco had been prevented from saturating an area with its stores. Clearly, it cannot be in the interests of the consumer for all the competition to be "consumed" by the activities of a colossus, as appears to have been the case in the places mentioned in the report, such as Inverness, Bicester, Milton Keynes, Twickenham, Southall and Hemel Hempstead.
The report goes on to state that in 104 postcode areas of Britain Tesco has in excess of 50% of the grocery market.
Surely it is within the remit of the OFT to force companies to sell stores if they become over-dominant in any particular catchment area as there would be clear evidence of the consumer being harmed by lack of competition.
To call this fair trading is, I believe, stretching the bounds of belief too far. There are undoubtedly short-term gains for the consumer; but in my view, and that of an increasing number of people, the price is becoming too high.
I get the impression from the report, and subsequent comments, that the chief executive of the OFT regards the big four as beneficent, philanthropic organisations that are the answers to customers' needs. Perhaps someone should tell him that these companies exist to deliver maximum returns for their shareholders. As soon as there is no or limited competition, the incentives to take advantage of that position will almost certainly become irresistible.
My hope is that, for once common sense will prevail before the damage currently being wrought on our industry and consumers becomes irreparable.
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