The report comes just weeks after the OFT launched an investigation into the supermarkets to establish whether stores like Tesco, Sainsbury's, Asda and Safeway use their huge buying power to drive down the prices they pay to suppliers but then fail to pass on those savings to consumers.
Paul Dobson, one of three academics commissioned by the OFT to produce the report, said yesterday that British shoppers must look at the prices charged in supermarkets overseas and wonder whether they are being "ripped off" at home.
"It appears from our research that there is generally an absence of intense competition on high streets and in supermarkets," he said.
"The result is higher profits for the retailer but higher prices for the customer."
The report expresses concern that the increasing dominance of major supermarkets could lead to an abuse of power.
Research has shown that profit margins enjoyed by UK retailers are three times those of their counterparts in other countries in Europe and in the United States. The report shows that the market share of the largest five food retailers has grown from 28 per cent in 1984 to around 44 per cent. Profit margins have increased by 50 per cent in the same period.
As suppliers, farmers have been up in arms over their treatment by the supermarkets. One Ipswich pig farmer yesterday said that supermarkets paid him "half the cost of production". He added that it was impossible for UK farmers to produce animals at the same price as continental European rivals because of Britain's food production legislation.
Farmers have been incensed by claims from Tesco that the supermarket group "makes no money on meat". Tesco and the other supermarkets maintain that more stringent food processing in the wake of the BSE scare has made the production of meat more expensive.
The OFT report was criticised by the supermarket operators. Asda said: "Whenever we achieve savings or our suppliers give us a better price, we pass that on to the customers."
Safeway lambasted the report, saying it contained "no original research". The company said recent research into comparative prices showedBritish prices were near the bottom, with Italy the cheapest and Belgium the most expensive.
The supermarkets pointed to price campaigns launched in the past few days by Asda and Sainsbury's as evidence of healthy competition. But industry experts say the supermarkets have launched the initiatives because they know the market is being scrutinised.
They also say prices in America are cheaper because it is a bigger market with lower shop rental and transport costs. Analysts add that food prices in countries like Germany are cheaper because supermarkets there do not offer the same quality of service as in Britain.
The OFT is due to report its preliminary findings in December.Reuse content