Outlook: `Rip-off' Britain

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The Independent Online
THE TEETH of the Competition Act grow sharper by the day. This piece of putative legislation slipped largely unnoticed on to the agenda when Margaret Beckett unveiled it in Labour's first year in power. But now, under Stephen Byers and backed by the "Rip-Off" Britain bandwagon, it is front page news.

The level of interest is no surprise given the powers available under the act. With the OFT able to fine firms 30 per cent of their turnover, the sums are enormous. And in targeting specific industries such as supermarkets, banks and the car makers, he has chosen powerful enemies

But. Is the OFT really going to turn round and fine Tesco pounds 5bn for abuse of market power?

It is possible that the mere threat may be enough both to change corporate practices and increase consumer pressure for a better deal. It is ludicrous to suggest, as some newspapers have, that excess profits will always be competed away by new entrants. We do not live in a world of perfect competition and every businessman would love a monopoly given half a chance. Threats can work and the history of competition inquiries shows that sectors being investigated often sharpen-up their acts even before the process has run its course.

Whether Mr Byers blanket approach will prove workable remains to be seen. There are clearly "rogue" sectors like the car industry where restricted distribution through approved dealers keeps prices artificially high.

But the attack on the UK supermarkets, though no less valid, may prove to be superfluous. This is a sector where market forces are already doing the government's dirty work for it. The supermarkets have got themselves into such a tizzy over Wal-Mart's takeover of Asda that they are falling over each other to lower prices.

As a shot across the bows Mr Byers actions are laudable. Whether it all works in practice is less certain. It will take years before any case comes before the courts. All good news for the lawyers, of course. But the US is clearly the government's model and anything that places more power in the hands of consumers should be welcomed