Britain’s €138 billion grocery sector faces anti-competitive inquiry

A FULL-BLOWN inquiry into Britain’s £95 billion (€138.8bn) grocery sector was confirmed yesterday after fears of anti-competitive practices sparked a massive public response.

The Office of Fair Trading (OFT) referred the sector to the Competition Commission because evidence suggested some chains were abusing their size by pricing products below cost.

It also believed that supermarkets were using large ‘land banks’ to stop rival retailers opening new outlets and said its concerns were shared by the bulk of the 1,200 consumers and businesses who responded to its initial report in March.

John Fingleton, chief executive of the OFT, said: “This reference will allow the Competition Commission to examine in detail all aspects of the grocery sector, ensuring that consumers are able to benefit from strong competition through lower prices, improved quality and choice, and continuing innovation in the market.”

The OFT found that some supermarket chains will only sell off their land to buyers who will not build competing stores on it.

These factors — coupled with local planning rules — are said to make it hard for new stores to open.

Yesterday’s decision by the OFT means that the grocery sector could be under the cloud of investigation for as long as two years.

The scope of the inquiry could be extended beyond the points raised in the OFT’s referral. If the Commission found evidence of anti-competitive behaviour it would produce a set of corrective measures, but it would not introduce fines.

It is the third time in seven years that major supermarkets have been investigated as the commission looked at the whole sector in 2000 and then examined competition issues that arose from a battle for Safeway three years later.

Tesco said the referral did not come as a surprise and it was confident the Commission would back the view that consumers have benefited from falling prices.

Chief executive Terry Leahy said: “This inquiry gives us an opportunity to address some of the myths surrounding our industry.

“We will also reiterate the consumer in every walk of life benefits from the choice, value, quality, convenience, range and service that supermarkets like Tesco provide.”

Analysts believe Tesco will come under the biggest scrutiny because of its status as Britain’s largest grocer and it is thought it owns more than half of the land that is troubling the OFT.

A spokeswoman for Asda said an inquiry was unnecessary, but was pleased that the OFT report highlighted planning as a real concern.