Supermarkets referred to Competition Commission

08 April 1999

Supermarkets referred to Competition Commission

By Johann Tasker

THE Office of Fair Trading (OFT) this morning referred the 80 billion-a-year retail sector to the Competition Commission for a detailed investigation into profit levels.

The referral follows an eight-month OFT competition inquiry which examined profits made over a five year period by Tesco, Sainsburys, Safeway and Asda.

John Bridgeman, director-general of Fair Trading, had already revealed last month he was unable to conclude that there are no excessive profits in the sector.

Farmers have long claimed that supermarkets have failed to pass on falling livestock values to consumers in the form of lower meat prices.

This morning Mr Bridgeman appeared to back that view.

I have to conclude that there is a level of profitability here which requires further investigation by the Competition Commission, he said.

The Competition Commission, formerly the Monopolies and Mergers Commission, now has 12 months to report on whether supermarkets are exploiting their position.

It will also investigation whether a monopoly exists in the sector and, if so, whether it is operating against the public interest.

Mr Bridgeman said the results of the OFT inquiry had raised several important competition issues within the food retailing industry.

I am concerned, for instance, that grocery prices are often set to match competitors, rather than to undercut them, he said.

Mr Bridgeman said he shared farmers concerns that the tremendous buying power of supermarkets may become exploitative and disadvantage suppliers.

The many responses from suppliers during our inquiry suggests that it is something which needs to be looked at by the Competition Commission.