Irate Asda ready to renew drug war

Retail chief reacts angrily as OFT admits delay in investigation
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The Independent Online
Asda chief executive Archie Norman has launched a furious attack on the Office of Fair Trading for sloth in investigating the pounds 2bn non- prescription medicine market and is threatening to bring forward a renewed price war on vitamins and other over-the-counter drugs.

His outburst came as the Independent on Sunday disclosed to him that the OFT inquiry, due to be completed by the end of this month, will not now be appearing this side of summer.

"The OFT seems to move with amazing slowness," he fumed. "This is not a complex issue - there is no good reason for this dragging on for so long. It seems to be stuck in the treacle of the OFT process. It is frustrating but not surprising."

He indicated that the delay was likely to accelerate plans to launch an extended range of Asda own-label medicines with more than 50 products instead of 17.

Rather than wait for the OFT report, Asda has already opted to repackage its range of medications, whose prices fall outside the control of the price-fixing arrangement. These will include versions of Seven Seas and Sanatogen, two of the vitamin brands in Asda's initial challenge to the 25-year-old price-maintenance agreement on over-the-counter drugs last year that sparked the OFT review.

"Pricing has not been aggressive enough," said Mr Norman. "The time has come to change that. We want to keep the issue on the front-burner."

An OFT spokesman confirmed: "The report is some way off. We are looking perhaps towards the autumn and are awaiting more information because we want to do a full consultation."

Asda, Britain's third biggest supermarket group, is also looking to increase the promotion of its own-label products.

"This will include increased marketing of a range of discount, own-label products by mail order," Mr Norman revealed. "We are going to start to undermine retail-price maintenance by greater price competition."

His comments suggest prices could be considerably more than 15 per cent below those of branded products.

Boots, the market leader, is likely to be Asda's main target, but the move would also hit Kingfisher's Superdrug and other supermarket chains which have been expanding the number of in-store pharmacies to tap a highly lucrative market.

The prospect of a renewed price war in over-the-counter medicines comes at the end of a week when Asda lodged a complaint with the European Commission in a bid to have price maintenance on such medicines declared illegal.

Asda claims the price-fixing infringes the Treaty of Rome and is another example of an outmoded piece of "junk law". It estimates that some retailers and suppliers are making a 100 per cent profit on some drugs and medicines.

The company, which was to the fore in successfully breaking the Net Book Agreement, cut prices on some 80 vitamins and supplements by up to 20 per cent last October, but the initiative ran into trouble when manufacturers applied for and won a court injunction.

The National Pharmaceutical Association, which represents pharmacists, has warned that many of Britain's 8,000 independents could go out of business if a price war erupted.