Supermarket chains face a full review of their effect on Britain’s independent retailers after a government watchdog today reversed its position and said it will push for an inquiry.
The Office of Fair Trading (OFT) has caved to pressure from small business pressure groups and revealed today that it will refer the ongoing controversy over supermarkets’ dominance to the Competition Commission for a full-scale review of the industry.
The OFT was ordered by a tribunal last year to review its decision not to launch an inquiry into small businesses’ complaints of anti-competitive practice by supermarkets situated on the outskirts of local communities.
At the time, the OFT’s chief executive John Fingleton said that his agency serves to protect competition, not to protect businesses that “do not respond effectively to the demands of consumers, or more generally to protect less efficient or less competitive business from the rigours of the market.”
Today, however, Fingleton pledged that convenience store sector has changed and “our provisional view is that it would be appropriate for the Competition Commission to investigate how that has affected consumers in local markets.”
Uproar from the small business community was given added impetus recently following a report from a group of cross-party MPs suggesting that supermarket giants will kill off Britain’s independent shops by 2015.
Business leaders have roundly welcomed today’s announcement.
“This is a landmark ruling for independent retailers and consumers,” said David Rae, chief executive of the Association of Convenience Stores (ACS). “The referral has been made primarily on the basis of the issues we raised.
“Buying power, below cost selling, price flexing, and the decline in choice caused by the closure of many independent shops are all identified in the OFT’s decision, and these are the issues that the Competition Commission needs to address.”
Rae added that a poll commissioned by the ACS shows that 59% of the public wants the government to intervene on the issue of supermarket dominance, and only half this number are content to allow the market to continue without further attention.
The Forum of Private Business (FPB), however, said that while it welcomes the prospect of a fresh inquiry, it is concerned any evaluation will lack in scope.
“The OFT's analysis published today of the grocery market fails to address many of the social and environmental issues raised by the FPB and the All Party group of MPs,” said FPB chief executive Nick Goulding.
“It is too narrowly focused on competition and not on the negative affects of supermarkets’ power on struggling independent retailers. The OFT seems more concerned with barriers to building more supermarkets than recognising the damage that is being done.”
