Competition Commission Must Delve Deeper
20 Feb 2007
The Association of Convenience Stores (ACS) has delivered a new submission on the Competition Commission’s Emerging Thinking document, issued at the end of January. As a key stakeholder in the inquiry, ACS was invited to submit comments on the Emerging Thinking.
ACS Chief Executive James Lowman said: “There are still enormous gaps in the information gathered by the Commission so far. We are convinced that there is evidence of the major grocery multiples abusing their buyer power and manipulating prices at a local level, and the Commission must leave no stone unturned in seeking out this information.”
ACS’ submission, compiled with colleagues from the Federation of Wholesale Distributors, the Scottish Grocers Federation and the Northern Ireland Independent Retail Trade Association, focuses on two key issues on which the Commission has not yet arrived at a credible position:
• The lack of recognition of a national ‘wholesale’ market, comprising independent third party wholesalers as well as the ‘Big Four’ and other multiples’ buying and distribution functions. ACS contends that this market operates on a national basis, and that understanding it is critical to analysing market power in the grocery industry.
• Analysis of the buying price differentials that lie at the heart of the imbalance of power in the grocery market. Research into this crucially important factor is lacking, and ACS argues that significant additional data gathering is required to establish the size of and cause of buying price differentials. Work conducted with GfK suggests that abuse of buyer power is an issue of significant concern, and ACS is pressing the Commission to follow this up in far greater detail.
James Lowman said: “If the Commission do not get to grips with these issues now, then they will have failed to grasp the key issues at the centre of this inquiry. Thus far, their approach to finding out about buying price differentials, buying practices, and the true effect of this behaviour of suppliers of all sizes, has been woefully inadequate. As a minimum, we should be seeing a repeat of the exercise conducted during the last inquiry, which established a buying price differential of 11% between a major multiple and an independent wholesaler. The Commission’s analysis in this inquiry suggests that this differential does not exist – a finding that contradicts all business and economic logic. The Commission must look into this issue in far greater detail.”
ACS has been invited to its second full hearing with the Commission on 4 May. James Lowman said ACS would continue to work with colleagues in developing the arguments and evidence that had been given to the Commission thus far.
James Lowman continued: “There will be a period of frenzied activity over the next few months. We were encouraged by the Commission’s response to our arguments on the waterbed effect and on local pricing behaviour, and we will continue to discuss these issues with the Commission.”
Contacts
Shane Brennan Public Affairs and Communications Manager
01252 515001 / 07921 372978
Rachel Lawson Communications Co-ordinator
01252 515001
Michael Saxton Grappa
020 7486 4448
Notes to editors:
1. ACS is the convenience store champion, helping local shops thrive through lobbying, insight, information and commercial services.
2. The Competition Commission published their emerging thinking in January alongside eight working papers and can be found on their website at http://www.competition-commission.org.uk/inquiries/ref2006/grocery/emerging_thinking.htm.
3. ACS’ submission can be obtained at www.thelocalshop.com in the Grocery Market Inquiry section.
4. The Commission will notify their provisional findings in June and have set themselves a target of publishing their final report by November 2007, and must report by May 2008. The Inquiry timetable can be found at http://www.competition-commission.org.uk/inquiries/ref2006/grocery/core_timetable.htm.
5. The Competition Commission commissioned GfK, a worldwide market research group, to carry out a survey on suppliers. The main objective of the research was to obtain information from suppliers about their relationships with their customers to determine whether any features in the supply of groceries distort competition.
ACS Chief Executive James Lowman said: “There are still enormous gaps in the information gathered by the Commission so far. We are convinced that there is evidence of the major grocery multiples abusing their buyer power and manipulating prices at a local level, and the Commission must leave no stone unturned in seeking out this information.”
ACS’ submission, compiled with colleagues from the Federation of Wholesale Distributors, the Scottish Grocers Federation and the Northern Ireland Independent Retail Trade Association, focuses on two key issues on which the Commission has not yet arrived at a credible position:
• The lack of recognition of a national ‘wholesale’ market, comprising independent third party wholesalers as well as the ‘Big Four’ and other multiples’ buying and distribution functions. ACS contends that this market operates on a national basis, and that understanding it is critical to analysing market power in the grocery industry.
• Analysis of the buying price differentials that lie at the heart of the imbalance of power in the grocery market. Research into this crucially important factor is lacking, and ACS argues that significant additional data gathering is required to establish the size of and cause of buying price differentials. Work conducted with GfK suggests that abuse of buyer power is an issue of significant concern, and ACS is pressing the Commission to follow this up in far greater detail.
James Lowman said: “If the Commission do not get to grips with these issues now, then they will have failed to grasp the key issues at the centre of this inquiry. Thus far, their approach to finding out about buying price differentials, buying practices, and the true effect of this behaviour of suppliers of all sizes, has been woefully inadequate. As a minimum, we should be seeing a repeat of the exercise conducted during the last inquiry, which established a buying price differential of 11% between a major multiple and an independent wholesaler. The Commission’s analysis in this inquiry suggests that this differential does not exist – a finding that contradicts all business and economic logic. The Commission must look into this issue in far greater detail.”
ACS has been invited to its second full hearing with the Commission on 4 May. James Lowman said ACS would continue to work with colleagues in developing the arguments and evidence that had been given to the Commission thus far.
James Lowman continued: “There will be a period of frenzied activity over the next few months. We were encouraged by the Commission’s response to our arguments on the waterbed effect and on local pricing behaviour, and we will continue to discuss these issues with the Commission.”
Contacts
Shane Brennan Public Affairs and Communications Manager
01252 515001 / 07921 372978
Rachel Lawson Communications Co-ordinator
01252 515001
Michael Saxton Grappa
020 7486 4448
Notes to editors:
1. ACS is the convenience store champion, helping local shops thrive through lobbying, insight, information and commercial services.
2. The Competition Commission published their emerging thinking in January alongside eight working papers and can be found on their website at http://www.competition-commission.org.uk/inquiries/ref2006/grocery/emerging_thinking.htm.
3. ACS’ submission can be obtained at www.thelocalshop.com in the Grocery Market Inquiry section.
4. The Commission will notify their provisional findings in June and have set themselves a target of publishing their final report by November 2007, and must report by May 2008. The Inquiry timetable can be found at http://www.competition-commission.org.uk/inquiries/ref2006/grocery/core_timetable.htm.
5. The Competition Commission commissioned GfK, a worldwide market research group, to carry out a survey on suppliers. The main objective of the research was to obtain information from suppliers about their relationships with their customers to determine whether any features in the supply of groceries distort competition.