Regulatory challenges to Tesco’s market dominance should concentrate on its procurement power rather than its share of the retail market, according to an expert on competition law.
Michael Hutchins said the way the competition authorities viewed the retail market, with convenience and one-stop shopping seen as two distinct sectors, made it difficult to mount a challenge to Tesco’s takeovers of c-store chains on the grounds of its dominance of the retail market.
But the competition authorities were also obliged to look at the procurement side of the market, which is considered as a single entity, he said. This view was confirmed by another speaker, Bob Gaddes, deputy director of the mergers branch of the Office of Fair Trading, who said issues of buyer power were looked at in the context of a single market. Gaddes also said one of thresholds for a takeover to trigger an investigation was when a deal resulted in a company’s market share exceeding 25%.
Hutchins pointed out that Tesco’s share of the procurement market was about 30% and posed the question: “Why don’t they get called in every time they buy a c-store?”
He said competition law was based on consumer welfare, and this was generally interpreted as ensuring low prices, but consumer choice also had to be considered.
If a single company dominated the procurement market this could result in a substantial lessening of choice and raise competition issues.
Hutchins also suggested that any changes to the competition framework were unlikely to be initiated by the Government so it was only through private actions, by individual parties such as the FWD or a group of affected parties, that change might be instigated.