Michael Harrison's Outlook: Supermarket sweep: sector looks like getting a clean bill of health for the third time running

Dunwoody creates a storm in a port; A mea culpa from the Governor

The big supermarket chains have escaped intact from two investigations in the past six years and if the Competition Commission's "emerging thinking" is any guide, you would have to bet on them getting away largely scot free for a third time. That, at any rate, was how the markets interpreted the regulator's half-time report on the dominance of the big four and their effect on suppliers, on the one hand, and smaller rivals on the other. Anyone expecting a smash and grab raid on the ubiquitous Tesco will have been sorely disappointed.

Like the lawyer that he is, Peter Freeman, who chairs both the commission and this particular inquiry, has listened to a lot of opinions but is interested only in facts. His 60-page report starts with a salutary one for all those who would have us believe that Sir Terry Leahy is the devil incarnate: since the last time the sector was investigated in 2000, UK grocery sales have grown by 17 per cent but the real price of food has declined by 7 per cent. Not much evidence there of Tesco using its infamous land bank to corner local markets and gouge the customer.

Some of the other statistics do not paint Tesco in quite such a consumer-friendly light, particularly the one showing that the number of UK stores it operates has grown three-fold over the same period to a frightening 1,900. Translated on to a local level, that means Tesco now has 10 outlets on London's Fulham Road alone. Only Morrison's can match that scale of growth but it had to double in size by taking over Safeway to keep pace, which is not quite the same thing.

The commission says it would be concerned if Tesco were to manoeuvre itself into a position nationally or locally where no other retailer could compete effectively - but wouldn't anyone? More interestingly, does it seriously think there is any danger of this happening? From the mass of information collected by Mr Freeman and his fellow panel members, it is hard to see a guilty verdict being handed down. Their report is long on evidence and short on conclusions but what has so far "emerged" is unlikely to hold too many fears for Sir Terry. The commission is not concerned about Tesco's 30 per cent market share per se. Nor does it accept the estimates of rival supermarkets that, unchecked, this will rise naturally to 45 per cent simply by dint of the company's vast land bank.

As far as suppliers are concerned, the commission says that, with the exception of dairy and pig farmers, there is no clear evidence that supermarkets are using their buying power to stifle innovation or put companies out of business altogether. For good measure, it also suggests that the big four do not always get better terms from suppliers than smaller retailers.

Neither we nor the commission know the extent to which the "fear factor" has stopped suppliers speaking their mind. But what the commission does detect is a "general concern" that the stranglehold of the big four, and Tesco in particular, is so powerful that it cannot but distort competition and work against the interests of consumers.

The commission now plans to test whether that generalised and widely held feeling of unease is borne out by how the big supermarkets really compete at local level. Mr Freeman starts from the point that "in a competitive market, commercial success should not be penalised unless there is clear evidence of an abuse of market power and harm to consumer." Since he's a lawyer, he must already know that the burden of proof needed to convict Tesco or anyone else will have to be very high.

Dunwoody creates a storm in a port

The American government had no qualms about intervening to prevent what it saw as an undesirable foreign owner taking control of some of the country's biggest ports. Here, it has taken the estimable but somewhat fearsome chairwoman of the Commons Transport Select Committee, Gwyneth Dunwoody, to insert her oar in similar fashion.

Neither ministers nor regulators had a word to say last year when first P&O and then Associated British Ports, PD Ports and the smaller ports operator Simon Group were taken over by overseas interests. Given that 95 per cent of Britain's traded goods are transported by sea and that ABP alone accounts for a quarter of all this, that might seem like an odd omission.

Ms Dunwoody and her colleagues on the committee certainly think so. They have concluded that Britain's ports are too valuable to be exposed to the unregulated whims of international capital and want the Government to state clearly the circumstances in which any threat to the national interest would trigger market intervention.

Unlike the Bush administration, which cited security concerns for objecting to the colour of the skin of P&O's new owner, Dubai Ports World, the select committee is more concerned about UK commercial interests.

It is worried that with so much of Britain's port industry now controlled by companies in far-flung places such as Singapore, Canada and Australia, investment and development decisions might not always favour the UK. It is also concerned that the likes of Goldman Sachs and Brown & Babcock, which bought ABP and PD Ports respectively, may decide there is more profit to be had in treating port companies as land banks rather than important cogs in the trading system.

It is possible to over-egg these fears. UK port companies were viewed as property plays long before the likes of Goldman came on the scene. Nevertheless, it is instructive that PD Ports' ambitious scheme to turn Teesport into the Gateway to the North has gone strangely quiet since it fell under foreign ownership. The relevance goes beyond maintaining Britain's seafaring tradition since the Teesport scheme has important regional development and environmental implications.

Ms Dunwoody now awaits an answer from our Ports Minister, Stephen Ladyman. Since he is a member of a government which saw absolutely nothing wrong with the country's airports being taken over by the Spanish, perhaps she should not hold her breath.

A mea culpa from the Governor

It is the letter Mervyn King would have written to the Chancellor had inflation breached 3 per cent last month. Instead he delivered it last night over dinner to the lucky burghers of the Birmingham Chamber of Commerce. It is as close as the Governor of the Bank of England is likely to get to admitting that he got monetary policy wrong, setting interest rates too low for too long.

Tracing the reasons for the rise in inflation well beyond the target figure of 2 per cent, the Governor identifies four culprits, only one of which the Bank could do nothing about - the sharp rise in energy prices. The other three - a quicker than expected rebound in consumer spending, the rise in inflation expectations and higher factory input costs feeding through into higher prices - are all meat and drink to the Monetary Policy Committee and the kind of pressures it should be ready to counteract. The Governor now sees inflation falling back later this year, possibly quite sharply, provided pay demands are kept under tight control. Something else for the Birmingham Chamber of Commerce to chew on.

m.harrison@independent.co.uk