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Business Comment

James Moore: Supermarket solution is in hands of regulators

Outlook It seems as if the supermarkets have at last bitten off more than they can chew. In a surprise move, the Government has given the Groceries Code Adjudicator the power to fine them if it decides they are squeezing prices to suppliers to below market rates, a constant complaint of farmers.

Cue howls of outrage from the supermarkets, and grim warnings of higher prices to consumers to come. Which is exactly what you'd expect them to say.

In one respect, this makes sense. There's not a lot of point setting out codes to govern behaviour if they don't have any teeth.

But what this is actually doing is treating the symptom as much as the disease. The only reason there is a need for such a regulator is because of a profound market imbalance between the power of the supermarkets when compared to their suppliers.

The grocery industry has become concentrated in too few hands, and the relentless march of the big four back on to the high street through their expansion into and takeover of the convenience sector is making a bad situation worse.

There are good reasons why supermarkets are just about the only part of the retail sector it's worth investing in right now.

Giving the code adjudicator some teeth might ease some of the pressure on suppliers for now. But the only way to solve this problem long term is for the competition regulators to bare their teeth.