Supermarkets say shoppers will bear costs of competition drive

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The Independent Online

Supermarket groups have warned that consumers would be hit in the pocket after the Competition Commission confirmed plans to set up an "ombudsman" service to police parts of the grocery market.

They fear the move – which will have to be industry-funded after ministers refused cash – will be the first step in the creation of a full-blown watchdog as "regulatory creep" induces the new ombudsman service to progressively expand what it does.

And they warned that the costs of such a watchdog will inevitably be passed on to consumers through higher prices at the check-out.

The commission issued its final verdict on the sector yesterday after a two-year investigation, which confirmed plans to go ahead with the ombudsman – dubbed Offshop – who will police a new code of practice governing the relationships between the big chains and their suppliers.

The Office of Fair Trading will also be called upon to oversee planning applications by supermarkets to ensure they meet a "competition test", although this has sparked concerns about whether the OFT has the resources to do the job. Action will be taken to prevent land agreements that can restrict entry by competitors.

Peter Freeman, chairman of the Commission, said: "In many important respects, consumers are receiving the benefits of competition, such as value, choice, innovation and convenience, but we need to take appropriate action to address those areas where they could be served better and where their interests could be damaged in future."

Mr Freeman had little comfort for smaller retailers squeezed by the big chains. He said: "While we have been sympathetic to those finding themselves under pressure in this market, particularly independent retailers, this does not mean that competition is not working well – it is often the effects of rivalry between retailers which benefit the consumer. Competing with large retailers is difficult but our evidence does not show that independent retailers or the wholesalers that supply them are in terminal decline."

Supermarkets welcomed the finding that consumers are doing well out of the current market but voiced fears that the ombudsman could impose huge costs.

The Tesco director Lucy Neville-Rolfe said: "You have to be careful when creating new regulators because their role may expand and the cost of that will ultimately be borne by consumers."

Asda's chief executive, Andy Bond, said: "The CC's proposals on the new code and an ombudsman could cost the industry hundreds of millions, leading to higher prices for customers, which will hit families hard at a time when they are already feeling the pinch."

Dominic Eagleton, policy analyst at ActionAid, said: "The recommendations are good news for the millions of poor workers around the world who produce and pack goods for the big four supermarkets. Faced with a crisis over global food supplies, the need for a supermarkets watchdog to ensure a fair and sustainable food chain is greater than ever."

The New Economics Foundation said the plans "lay the field wide open for a new level of supermarket dominance".

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