Local Shops failed by Grocery Market Investigation
30 Apr 2008
ACS has criticised the final report of the Competition Commission published today.
ACS Chief Executive James Lowman said: “After a two year investigation, and despite the weight of evidence showing the extent of competition problems in the market, this Inquiry has failed to support choice and diversity in the grocery market.
“The overriding failing of this Inquiry is that the Commission views competition in the grocery market as competition between the big four retailers. This approach ignores the critical need for a variety of retailers and supply chains. It is out of kilter with consumer trends towards more local shopping, and neglects the needs of many groups of consumers whose requirements are not properly met by the big four superstores.”
Key recommendations in the final report include:
• a reformed code of practice to regulate the dealings between supermarkets and their suppliers
• a reformed code of practice, with a proposal for it to be policed by a new Ombudsman
• a new competition test to prevent supermarkets from building stores in areas where they are already dominant
ACS claims the Competition Commission has over the course of its Inquiry uncovered evidence that shows the anti-competitive effects of supermarket buyer power. However, the Commission has chosen not to take action to address major distortions in buying prices. It has ignored significant amounts of below cost selling and aggressive pricing behaviour, and the alarming trend of consolidation in the number of stores built, and acquired, by an ever smaller number of large companies.
Mr Lowman commented on the specific recommendations.
On planning policy
“ACS supports the Commission’s aim to prevent one large company dominating a local market through a planning competition test. But the proposal is not strong enough to make a real difference to the so called ‘Tesco Town’ effect. The proposed test applies only to big stores, over 1000 sqm. Therefore, in a town dominated by one large supermarket nothing prevents Sainsbury or Tesco, for example, from opening as many ‘Local’, ‘Metro’, ‘One Stop’ or ‘Express’ stores as they want. This is a gaping loophole that undermines the credibility of the Commissions recommendation.
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“We welcome the Commission’s decision not to undermine other aspects of national ‘town centre first’ planning policy. Over the course of the Inquiry ACS and others have made a credible and convincing case for the Commission not to recommend harmful changes to other planning rules currently in place, such as the ‘need’ test and ‘sequential tests.’ Reforms that would undermine the Government desire to prevent out of town supermarkets from harming the vibrancy and vitality of town centres.”
On the retail ombudsman:
“We welcome the Commission’s recognition that intervention is needed to stop supermarkets abusing suppliers. However, the big problem with the previous code of practice and enforcement was that suppliers were too fearful to complain. It is not clear how the Commission’s new proposals will tackle this ‘climate of fear’.
“We are concerned that the Commission is far from decisive in setting up the Ombudsman. There is much left unresolved in the appointment and funding of the Ombudsman. We are very concerned that what follows is a long period of legal wrangling that means that no new regulation will be in place for some time to come.
“The Commission has also failed to address the significant distortions in buying prices. It has found that supermarkets can command as much as 15% better buying terms. This buying advantage is not justified economically, and this undermines the ability of smaller competitors to invest and compete. This buying price differential is the single biggest threat to healthy competition and long term consumer interest, but the Commission has failed take this seriously.“
On convenience store numbers
“For the Commission to stick to its view that convenience store numbers are increasing is astonishing. The Commission was presented with ample evidence from suppliers and wholesalers showing independent convenience store numbers are in decline. It is astonishing that after such a long investigation its understanding remains so limited. This failure has undermined the credibility of its recommendations in a number of areas.”
Mr Lowman explained where the campaign goes next:
“For two years Government has deferred all decisions and consideration of the negative impacts of unfair competition in the grocery market to the Competition Commission. The Inquiry has concluded having failed local shops. ACS will not be allowing the politicians to put off action.
“The campaign to ensure that local shops, specialists and vibrant high streets have a place in the future of the market and the communities they serve continues.”
Contacts:
Shane Brennan Public Affairs and Communications Manager
01252 515001/ 07921 372 978
Nina Collins Communications Coordinator
01252 515001
Michael Saxton/ Julie Kirby Grappa PR
020 7602 9222
Notes to Editors:
1. ACS (Association of Convenience Stores) is the voice of local shops, representing over 33,000 convenience stores. ACS helps local shops thrive through lobbying, support and networking opportunities.
2. the CC final report is available at http://www.competition-commission.org.uk/rep_pub/reports/2008/538grocery.htm
3. ACS has been a main party to the Inquiry details of the evidence submitted to the Inquiry is available at http://www.competition-commission.org.uk/inquiries/ref2006/grocery/main_party_submissions.htm
ACS Chief Executive James Lowman said: “After a two year investigation, and despite the weight of evidence showing the extent of competition problems in the market, this Inquiry has failed to support choice and diversity in the grocery market.
“The overriding failing of this Inquiry is that the Commission views competition in the grocery market as competition between the big four retailers. This approach ignores the critical need for a variety of retailers and supply chains. It is out of kilter with consumer trends towards more local shopping, and neglects the needs of many groups of consumers whose requirements are not properly met by the big four superstores.”
Key recommendations in the final report include:
• a reformed code of practice to regulate the dealings between supermarkets and their suppliers
• a reformed code of practice, with a proposal for it to be policed by a new Ombudsman
• a new competition test to prevent supermarkets from building stores in areas where they are already dominant
ACS claims the Competition Commission has over the course of its Inquiry uncovered evidence that shows the anti-competitive effects of supermarket buyer power. However, the Commission has chosen not to take action to address major distortions in buying prices. It has ignored significant amounts of below cost selling and aggressive pricing behaviour, and the alarming trend of consolidation in the number of stores built, and acquired, by an ever smaller number of large companies.
Mr Lowman commented on the specific recommendations.
On planning policy
“ACS supports the Commission’s aim to prevent one large company dominating a local market through a planning competition test. But the proposal is not strong enough to make a real difference to the so called ‘Tesco Town’ effect. The proposed test applies only to big stores, over 1000 sqm. Therefore, in a town dominated by one large supermarket nothing prevents Sainsbury or Tesco, for example, from opening as many ‘Local’, ‘Metro’, ‘One Stop’ or ‘Express’ stores as they want. This is a gaping loophole that undermines the credibility of the Commissions recommendation.
1/3
“We welcome the Commission’s decision not to undermine other aspects of national ‘town centre first’ planning policy. Over the course of the Inquiry ACS and others have made a credible and convincing case for the Commission not to recommend harmful changes to other planning rules currently in place, such as the ‘need’ test and ‘sequential tests.’ Reforms that would undermine the Government desire to prevent out of town supermarkets from harming the vibrancy and vitality of town centres.”
On the retail ombudsman:
“We welcome the Commission’s recognition that intervention is needed to stop supermarkets abusing suppliers. However, the big problem with the previous code of practice and enforcement was that suppliers were too fearful to complain. It is not clear how the Commission’s new proposals will tackle this ‘climate of fear’.
“We are concerned that the Commission is far from decisive in setting up the Ombudsman. There is much left unresolved in the appointment and funding of the Ombudsman. We are very concerned that what follows is a long period of legal wrangling that means that no new regulation will be in place for some time to come.
“The Commission has also failed to address the significant distortions in buying prices. It has found that supermarkets can command as much as 15% better buying terms. This buying advantage is not justified economically, and this undermines the ability of smaller competitors to invest and compete. This buying price differential is the single biggest threat to healthy competition and long term consumer interest, but the Commission has failed take this seriously.“
On convenience store numbers
“For the Commission to stick to its view that convenience store numbers are increasing is astonishing. The Commission was presented with ample evidence from suppliers and wholesalers showing independent convenience store numbers are in decline. It is astonishing that after such a long investigation its understanding remains so limited. This failure has undermined the credibility of its recommendations in a number of areas.”
Mr Lowman explained where the campaign goes next:
“For two years Government has deferred all decisions and consideration of the negative impacts of unfair competition in the grocery market to the Competition Commission. The Inquiry has concluded having failed local shops. ACS will not be allowing the politicians to put off action.
“The campaign to ensure that local shops, specialists and vibrant high streets have a place in the future of the market and the communities they serve continues.”
Contacts:
Shane Brennan Public Affairs and Communications Manager
01252 515001/ 07921 372 978
Nina Collins Communications Coordinator
01252 515001
Michael Saxton/ Julie Kirby Grappa PR
020 7602 9222
Notes to Editors:
1. ACS (Association of Convenience Stores) is the voice of local shops, representing over 33,000 convenience stores. ACS helps local shops thrive through lobbying, support and networking opportunities.
2. the CC final report is available at http://www.competition-commission.org.uk/rep_pub/reports/2008/538grocery.htm
3. ACS has been a main party to the Inquiry details of the evidence submitted to the Inquiry is available at http://www.competition-commission.org.uk/inquiries/ref2006/grocery/main_party_submissions.htm