Supermarkets report is a licence for monopoly, says BHF Group

In its inquiry into supermarkets the Competition Commission asked itself the wrong questions and has come up with the wrong answers, BHF Group said today.
In a statement reacting to today’s report from the commission on its two-year investigation of supermarkets, BHF Group says that in a previous report, the commission concluded that there was a “complex monopoly” in the grocery market. The statement says there is no doubt that that monopoly still exists and is more restrictive than ever.

The “remedies”, however, aim merely to promote competition between the big four supermarkets, ignoring the damage to the retail ecology that has already occurred, it maintains.

In the statement, Ian Firth, chairman of the BHF Group Legal & Parliamentary Affairs Committee, says: “The ‘planning test’ which will apply only to stores with more than 1,000 sq m in selling space and even then only when there are fewer than four big shops in the area, will only apply where a supermarket has more than 60% of the market.

“While competition authorities can normally be expected to think of 20 to 25% market shares as the beginnings of monopolies, the commission has ignored suggestions from Waitrose, among others, that 40% might be a reasonable trigger level and decided arbitrarily that a supermarket can control well over half of a local market before any competition concerns are raised at all.

“These recommendations constitute a licence for monopolists to stamp out their smaller competitors.”

He goes on: “It is shortsighted of the commission to ignore the effects that this will have on consumer choice as the monopoly power of the big four grows even stronger over time.

“We’re already facing the knock-on effects of this concentration of power on British manufacturers and suppliers as most of these giants exploit their strong links with India, China and others.”

Firth also says the commission has ignored the fact that a quarter of the big supermarkets’ turnover is in non-food.

The trade association welcomes the toughening of the code of practice for relationships with suppliers, particularly the banning of retrospective adjustments to terms of supply, and also welcomes the ban on restrictive covenants on land use.

Firth concludes: “In the light of these perverse conclusions, which will do active damage to retail diversity across the country, it is more important than ever that government does what it can to ensure that regulation is made to bear down less heavily on the time and resources that smaller businesses need to concentrate on competing with the increasingly deregulated retail giants.”