News
grocery retailers are generally delivering a good deal for consumers, the Competition Commission (CC) has concluded—but action is needed to improve competition in local markets and to address relationships between retailers and their suppliers.
The CC calls for the inclusion of a “competition test” in planning decisions on larger grocery stores; action to prevent land agreements which can restrict entry by competitors; and the creation of a new strengthened Groceries Supply Code of Practice with an independent Ombudsman to oversee it. Paul Finch, partner at Dickinson Dees LLP, says retailers will breathe a sigh of relief at the CC’s findings. “It’s fair to say that the ‘big four’ escaped relatively unscathed—a testament to the strength of their lobbying power,” he says.
”Commentators had speculated that supermarket chains would be forced to sell sites to encourage diversity. A similar investigation by the Commission introduced a cap limiting the number of pubs a brewer could tie, leading to a large volume of pubs being sold off.”
Capacity arguments alone, he says, are very mathematical and technical—and do not necessarily encourage competition.
“In the future, equal weight will have to given to the diversity test, but this should be met with some trepidation. Introducing the new test could prove highly problematic; if you are going to encourage choice then very careful consideration will have to be given to location. Failure to do so will further diminish town centre footfall. Whether or not the community has spending capacity, adding in another store will inevitably lessen the number of trips an individual will take into town. So while a viability test will ensure competition between the supermarket chains it could ultimately harm smaller independent retailers in town centres,” he adds.
Peter Freeman, chairman of the CC, says:
“In many important respects, consumers are receiving the benefits of competition, such as value, choice, innovation and convenience, but we need to take appropriate action to address those areas where they could be served better and where their interests could be damaged in future.”
