DISCUSSION

U.K. Probe: Consumers Need More Supermarket Competition

February 19, 2008Written by RetailWire Staff

By Bernice Hurst, Managing Director, Fine Food Network

Leaving aside all the ethical arguments about whether or not suppliers and consumers love or hate supermarkets and how much, if any, responsibility they (supermarkets, that is) have to anyone other than shareholders, there are still several important issues arising from the latest investigation into the British way of shopping.

The Competition Commission released its report on February 15, confirming conclusions it reached following a two year study based on whether competition has been "prevented, distorted or restricted" by supermarkets. The UK's supermarket sector is dominated by four major chains - Tesco, Asda, Sainsbury's, and Morrisons. Its terms of reference concerning choice defined local as being within a fifteen minute drive for most consumers.

Among the questions many consider unanswered are the relationship between suppliers (especially farmers) and consumers, particularly whether they have any sympathy with one another. It could be said that if one group benefits, the other is bound to lose with retailers caught in the middle. And while customers can vote with their wallets, suppliers often have more limited choices.

One proposal from the Competition Commission calls for the introduction of an Ombudsman to police the relationship between suppliers and supermarkets and ensure the suppliers get a fair deal. The Commission admits that there is often a "climate of fear" among suppliers, which stops them from speaking out when they have been badly treated by the supermarkets.

Location and the definition of convenient access are also debatable with arguments raging as to whether planners should ensure that consumers have a choice of several (different) supermarkets within a given distance rather than giving approval on a first come, first serve basis. Or, for that matter, where they should be located in order to make them more universally accessible.

A new "competition test" would take account of how many outlets a supermarket already has in a particular area but would apply only to those larger than 1,000 square meters and therefore not prevent a combination of different sizes being opened by the same company.

While the devil may be in the detail, the headline pronouncements all displeased one group or another. The Competition Commission may soon find that its work is not yet complete after all.

Discussion questions: Has the clout of the largest food retailers in the U.S. become such that they now hold an unfair sway over CPG manufacturers? Conversely, do small grocers in the U.S. need safeguards to assure they have access to product and fair pricing from CPG category leaders? Do the current trade "imbalances" in U.S. food retailing work to the benefit or detriment of consumers?

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