MPs demand a halt to supermarket acquisitions

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MPs are demanding that all new supermarket mergers and acquisitions be halted by ministers until they can ensure the survival of small shops.

After a seven-month investigation, a committee of MPs forecasts today that many independent shops - particularly convenience stores, petrol stations and newsagents - will shut by 2015, battered by the dominance of the big grocers.

The All-Party Parliamentary Small Shops Group has demanded the appointment of an independent regulator to conduct an inquiry into the behaviour of supermarkets and maintain a "vibrant, diverse and sustainable retail sector".

It urged the Office of Fair Trading to scrap its policy of considering separately the small and big shops owned by the store chains when ruling on mergers and acquisitions. It demanded the Government end the "Jersey VAT" loophole exploited by retailers to avoid paying tax on low-cost items such as CDs by routing them through the Channel Islands. After the publication of the report, Waitrose called for a competition review of the grocery sector.

MPs hope the recommendations will help small retailers compete more evenly with the big supermarkets, which have been accused of bullying suppliers and local authorities and predatory pricing to eliminate local rivals.

The all-party group was told by the Proudfoot chain in Withernsea, east Yorkshire, that a local Tesco store offered £8 back for every £20 spent - a 40 per cent discount which pushed the independent retailer to the brink. The price of supermarket petrol was found to vary according to the degree of local competition, indicating that once supermarkets dominated they increased prices.

For its report, High Street Britain: 2015, the committee heard from academics, retailers, ministers, regulators and consumers.It was told that thousands of smaller operators among Britain's 278,000 shops were going bust every year because of aggression from larger competitors, distortion of the supply chain, the high cost of property and crime.

While the small independent traders struggled, supermarkets thrived, the committee said, quadrupling the number of out-of-town stores from 1986-1997.

The committee said by 2015 independent petrol stations and newsagents were "very unlikely to survive", convenience stores and grocers were "unlikely to survive", and pharmacies and post offices had only a "moderate" chance of survival. Small rural shops and bakers were "likely to survive".

The committee tallied up the advantages and disadvantages of its forecast for the shape of the high street in 10 years and found seven advantages and 24 disadvantages. Among the advantages were improved logistics in the supermarket sector and the ease of implementing government directives because of the small number of remaining retailers. The disadvantages included a reduction in employment levels and reduced self-employment opportunities, particularly among ethnic minorities.

The committee said consumers would be "the biggest losers" in the rise of supermarkets. "Restricted choice of store brands, available products, shopping locations, as well as higher prices and reduced customer service, are all strong possibilities in 2015," the report said. "The erosion of small shops is viewed as the erosion of the 'social glue' that binds communities together."