The Competition Commission's latest report on the UK grocery sector was always likely to be a damp squib. In its initial report last October, the commission found no evidence that the large supermarket chains use predatory pricing to crush the life out of independent traders. Once that argument had been rejected by the commission, there was little for the supermarket sector's critics to hope for.
In fact, that report was far worse than they could have imagined. The commission came to the conclusion that the main problem in the UK grocery market is not the untrammelled power of the large chains but the constraints on their expansion. In other words, what the UK needs is more outlets run by the big four chains.
It is true that there are some proposals for reform in the final report. For instance, it recommends that the planning system be altered to prevent the chains from selling on land with restrictive covenants designed to stop competitors from building on it. A new "competition test" is proposed to be applied to future supermarket planning applications. The Commission also recommends the creation of an ombudsman, attached to the Office of Fair Trading, to protect farmers and suppliers in any disputes that might arise with the large chains.
It is quite right that supermarkets should be prevented from hoarding land. And it is fair that suppliers should have recourse to an independent arbitrator. Recent revelations of the rigging of dairy prices, to the detriment of farmers, by Asda and Sainsbury's in 2002 and 2003 demonstrates why such oversight is needed.
But it is hard to see how any of this is going to have a significant impact on the overall shape of the UK's grocery sector. After lobbying from the supermarkets, the Government last year announced plans to scrap the local authority "needs test", which allows new stores to be built only if there is demonstrable local demand. The commission's findings (that there needs to be supermarkets) will only encourage ministers down this road. The market share of the big four chains will thus continue to grow.
The Competition Commission seems keen to give the impression in its final report that it is not a soft touch. But it is hard to escape the conclusion that what it has done is give its seal of approval to the status quo.Reuse content