Andrew Simms: Adam Smith was right... businesses can't help colluding

Saturday 08 December 2007 01:00 GMT

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public," wrote Adam Smith in The Wealth of Nations, adding, "or in some contrivance to raise prices." Much has changed in the intervening centuries, but the inconvenient habit of so-called free markets to produce their opposite, monopolies or virtual monopolies, has not.

News that Asda, Safeway (now Morrisons) and Sainsbury have been found guilty of price fixing on a range of dairy products, and that Tesco and Morrisons are still under investigation, completes a historical arc.

Few people would have been surprised to learn Britain's supermarkets were guilty of rigging the market. More surprising was that one of their regulators actually noticed and proposed a fine of more than 100m.

There is a left hand and a right hand to the big stores' regulators: the Competition Commission and the Office of Fair Trading (OFT). The evidence of the past few weeks is that neither seems to be aware of what the other is doing.

Even while the investigation leading to these findings was under way by the OFT, just over a month ago the Competition Commission, still in the middle of its own major inquiry, found no "direct evidence of tacit coordination" among the retailers. But repeated investigations of the power of the supermarkets over the past decade have each found multiple examples of anti-competitive practices by the big supermarkets. Yet the regulators continue to allow the market to concentrate ever more power into ever fewer hands and these practices to continue.

Although it is a welcome admission of systematic market abuse, the OFT announcement should not be mistaken as evidence of what the regulator laughably calls "strong and effective competition law". Instead of acting to preserve an open market, they are suggesting moves such as the loosening of planning laws that will increase the collective dominance of a handful of supermarkets over British retail.

Today, public scrutiny should be as much on the regulators who allowed the chance of an open market to slip away, as it should be on the supermarkets. As ever more people and suppliers fall into a state of supermarket dependence, the message must be, riseup, we have nothing to lose but our chain stores.

Andrew Simms is the author of 'Tescopoly'

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies


Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in