Supermarket relief as report clears big five of profiteering

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The Independent Online

The country's top supermarket chains breathed a sigh of relief yesterday after the Competition Commission concluded there was no evidence of excessive profiteering and ruled out any significant curbs on their businesses.

The country's top supermarket chains breathed a sigh of relief yesterday after the Competition Commission concluded there was no evidence of excessive profiteering and ruled out any significant curbs on their businesses.

Its 16-month investigation into the food retailing industry, which was commissioned as part of the Government's so-called 'rip-off Britain' campaign, found that the industry was "broadly competitive" and that excessive prices were not being charged.

Although the competition watchdog did identify a number of ways in which the big five firms - Tesco, Asda, J Sainsbury, Safeway and William Morrison - "operate against the public interest", it offered only limited remedies. The most hard hitting of the Commission's recommendations was that an enforced Code of Practice should be introduced to regulate the relationship between large supermarkets and their suppliers. It discovered persistent selling below cost by the supermarkets but recommended that no action be taken.

Similarly, it did not propose any change to the existing planning regime but said there was a limited choice of supermarkets in some areas, adding that "the situation should not be allowed to deteriorate".

Commenting on the report, Stephen Byers, the Secretary of State for Trade and Industry, said: "Since the reference by the Director General of Fair Trading to the Competition Commission in April 1999, we have seen significant changes in the industry, the entry of Wal-Mart [the US retail giant] being a notable example, and a number of price cuts, which it is estimated have been worth over £1bn to the consumer." He added: "A competitive market is the best way of securing the good deal for the customer."

Terry Leahy, chief executive of Tesco, said: "I am pleased that the report confirmed the reality of our industry - that it is strong on competition and works in favour of the customer." Colette Blanchfield, a spokeswoman for Asda, which was taken over by Wal-Mart last year, said: "This is a thumbs up for the Wal-Mart effect ... We are glad to have the Secretary of State's endorsement." At Safeway, Kevin Hawkins, a spokesman, said: "Of course we are satisfied with the outcome [of the inquiry]. It's a pity it's taken so long and cost so much money. But if this is what it takes to lay the ghost of 'rip-off Britain, as far as the food industry is concerned, to rest, then so be it." Mr Hawkins said he was "surprised" by the Commission's insistence that a legally binding Code of Practice was necessary to protect suppliers. He said: "We [supermarkets] have spent the past four months working out a voluntary code which satisfied virtually all of the Commission's concerns."

Philip Dorgan, an analyst at WestLB Panmure, dismissed the Commission's report as "a complete and utter waste of public money". He said: "The investigation was politically motivated from the start ... At the end of the day, what have they done? Absolutely bugger all."

But a fresh round of consolidation within the UK is expected, with Safeway seen as the most likely target. J Sainsbury is seen as the most logical leader of a mooted consolidation bid to break up Safeway. Such a deal would catapault Sainsbury back to the number one slot in the UK supermarkets league - ahead of its arch rival Tesco.

Tesco shares closed up 1.25p at 251p. J Sainsbury rose 0.25p to 358.5p, while William Morrison jumped 4.25p to 177p. Safeway and Somerfield ended unchanged. The report ran to 1,202 pages and cost £3m to produce.

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