The OFT has expressed an intention to refer the market for the supply of groceries by retailers in the UK to the Competition Commission (CC) for more detailed investigation. It is set to reach a final decision on the matter any day now and in the meantime has published its analysis of the market for consultation.
Groceries represent 13% of all household spending in the UK and the market is dominated by the four major supermarket chains, Asda, Morrisons, Sainsbury's and Tesco. These large grocery players have now moved into the convenience store sector, a move which has brought them into competition with smaller chains and independent stores.
The OFT has noted positive results flowing from the competition in the grocery market, such as falling prices, increased choice and improved quality. However, it has also become concerned by other aspects of the market which it suspects is distorting competition and choice to consumers, particularly in the local markets.
- the current planning regime, which places a stringent 'needs test' on new supermarkets wishing to set up in competition with other supermarkets that are already established in a particular area;
- the existence of 'land banks' which large supermarkets are establishing simply to bar competitors from setting up in the vicinity of their existing stores; and
- the pricing policy of major supermarkets which includes below cost selling and price flexing.
When the consultation process ends the OFT will decide whether it will refer the matter to the CC. If referred, the CC will then have two years to investigate the market sector and suggest remedies.