OFT U-turn on supermarket supremacy

By Anita Awbi

- Last updated on GMT

Related tags: Oft, Supermarket, Retailing

Britain's 'big four' supermarket chains may face pressure as the
Office of Fair Trading (OFT) withdraws its previous ruling
protecting the grocery sector from investigation by the Competition
Commission (CC).

The climb-down came ahead of today's hearing before the Competition Appeal Tribunal, in which the OFT was required to defend its August decision to allow supermarkets to continue dominating the food retail market.

The tribunal was called following legal action by the Association of Convenience Stores (ACS) against the OFT's original assessment, and pressure by the UK's Forum for Private Business (FPB) lobby group.

But in a letter to the ACS last week the OFT said it would reconsider its ruling that the four main supermarket chains - Tesco, Asda, Sainsburys and Morrisons - are not squeezing out small independent retailers.

Together the 'big four' currently control 74 per cent of the grocery market, according to TNS figures.

The ACS originally complained to the OFT that high street monopolisation by the likes of Tesco is distorting the market and has forced nearly 2000 independent convenience shops into receivership over the last year alone - and demanded an independent investigation into the matter.

But, following an 18-month enquiry, the OFT refused to refer the issue to the Competition Commission (CC) for further investigation, defending the position of the retail giants.

The competition regulator has always treated the convenience market as separate from the supermarket sector - thus allowing Tesco to buy chains of convenience stores even though it holds more than 30 per cent of the supermarket sector.

But the OFT will now formally withdraw it's controversial judgment at today's hearing, in a historic turnaround.

A spokesperson for the FPB said that while the OFT's concession to re-open the probe is a positive step, it may not guarantee results for the ACS.

"Apparently the OFT will reconsider it's standpoint. Our view is that it has been a fairly toothless organisation that failed to get them [the supermarkets] into line,"​ he said.

"The government needs to flex its muscles on this issue."

The watchdog's previous reluctance to examine persistent price flexing allegations and its failure to investigate criticisms of the Supermarket Code of Practice are cited as main reasons for small business cynicism concerning the OFT step-down.

But the ACS remains optimistic, hoping to win some ground back for the destabilized small business sector.

"Back in August the OFT said no to us and no to our decision that supermarkets are seriously damaging competition in the grocery sector. But their action last week does show they have conceded some ground to us,"​ said an ACS spokesperson.

"These developments by the OFT are significant, and it does strike me as something that is incredibly rare for them to do,"​ he added.

FPB representatives recently met at the House of Commons to give oral evidence for its "High Street Britain 2015" enquiry to limit the expansion of large retailers in the convenience sector, calling on the government to order a CC investigation into the supermarkets' monopoly.

Meanwhile small retailers are hoping that the ACS will be able to defend their position and negotiate with the OFT to turn around current policy.

The British convenience market is valued at £23.9 billion, an increase of 4.9 per cent since 2004, according to the IGD.

But the independent retail sector is shrinking, reporting a 5.2 per cent fall in sales last year.

Related topics: Markets

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