Commission may need more time for Safeway inquiry

The Competition Commission investigation into the four supermarket bids for Safeway has become so broad that the inquiry is likely to miss its self-imposed deadline of 12 August, City analysts warned yesterday.

The comments came as the Commission published its "issues statement" on the bids from Tesco, J Sainsbury, Asda and William Morrison.

It confirmed that the Commission is considering broadening the scope of its investigation to include non-food sales as well as groceries, and convenience stores as well as the larger supermarkets. The statement also said it might look at whether internet home shopping could affect the definition of geographic markets. This is likely to focus most heavily on Tesco.com, the UK's largest grocery delivery service.

Paul Smiddy, a retail analyst at Robert W Baird Securities, said: "The danger is that it looks like they are delving deeper and deeper and going broader and broader so they will be unable to meet their August deadline. If it drags on into the winter then that's not going to help any of the parties involved."

Another analyst said: "They [the Commission] are certainly being thorough, aren't they? But the danger is that it will end up meaning that all the bids are blocked. And the trouble is that, the longer this drags on the weaker Safeway gets. We know staff are leaving there and that suppliers are tightening up on their terms, as you would expect."

Tesco said the scope of the investigation was not a surprise, and it was clear the Commission considered the issues to be the same for the three national supermarkets in the running.

The issues statement said that in addition to the previously stated areas of local and national competition and choice it would also look at whether any of the deals would result in higher petrol prices at the major supermarkets.

Other issues include the impact of increased buying power on suppliers. The Commission said it would look at whether suppliers to any successful bidder might try to recoup any lost margin with higher prices to smaller grocery retailers.

Retail entrepreneur Philip Green is the fifth bidder for Safeway but his bid has not been referred to the Competition Commission.