Supermarket probe opens complaint floodgates

Farmers in front of queue at Competition Commission
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The Independent Online

The £95bn grocery sector is facing a rough ride from the Competition Commission as submissions detailing its many alleged failings start to flood in.

The Office of Fair Trading referred the supermarket chains to the commission last month. The commission has since published a "statement of issues", in which it promised to conduct a full-scale investigation into the behaviour of supermarkets towards their suppliers and to ensure that this was carried out as quickly as possible.

Interested parties have been able to offer submissions only for a matter of weeks. However, a glut of submissions has already been lodged with the commission, from a range of individuals and organisations. They include farmers, the TUC, the consumer group Which?, the animal welfare body Compassion in World Farming, the National Federation of Woman's Institutes and Oxfam.

The OFT referred the supermarkets to the commission on a number of issues, and paid particular attention to the land bank built up by the big four chains, Tesco, Asda, J Sainsbury and Wm Morrison. All four have acquired a number of undeveloped sites that could significantly boost their market shares should stores be built on them. Tesco, the UK's number-one supermarket, has the biggest land bank.

So far, though, the majority of submissions have focused on the perceived raw deal suppliers get from supermarket chains.

One farmer told the commission how, when cauliflowers were in short supply at the end of last month, Tesco paid £1 per cauliflower for imports from Germany but only 50p for UK-grown produce.

He continued: "We have not made a significant profit now for six years, and indeed the 2006 year end is likely to show a significant loss as all our different produce areas have suffered from low prices."

Which? said it agreed with the OFT that the land bank did "raise competition concerns" and that it needed to be investigated "in detail". It called on the commission to devise "strong remedies" if it ruled that competition laws had been contravened. The TUC has focused on below-cost selling and buying powers, claiming these "arguably prevent, restrict and distort competition".

The OFT last looked into the supermarket sector in 2005 but decided against referring it to the commission. A successful legal challenge by the Association of Convenience Stores prompted it to look again.

The commission has also reviewed the grocery sector before, in 2000, leading to a Supermarket Code of Practice. This is intended to govern the behaviour of supermarkets, particularly regarding suppliers. But many feel that the code fails to offer protection because suppliers are too scared of jeopardising relationships with retailers to complain.

The commission's final report is due to be published in October next year.