FWD queries Inquiry findings

The Federation of Wholesale Distributors has queried some of the findings of the inquiry into supermarket dominance in the grocery market, which were released yesterday.
The FWD greeted the Competition Commission’s emerging thinking document as being generally helpful, but queried the basis for its preliminary finding that larger grocery retailers do not enjoy consistently favourable price differentials from suppliers vis-à-vis wholesalers.
“We believe the overall tenor of the document is encouraging. It clearly points up areas of concern where the Commission team has found indications of possible anti-competitive behaviour by the larger retailers that it will investigate further, such as below cost selling, price flexing and the waterbed effect,” said John Murphy, director general of FWD.
“However, we are not convinced that the CC has demanded the same quantity and quality of data on pricing from the supplier community that they have received from retailers and wholesalers,” he added.
“We urged the Commission to delve deeply into all the major suppliers’ price records, especially for larger quantities, so that it would be able to see the true state of affairs regarding the supermarkets’ buyer power once and for all.
“Its initial finding is based on price data from just 15 suppliers of major branded goods on an unspecified number of lines. But the CC is already pointing out that this is in contrast to the findings of the 2000 investigation where the then five largest supermarket groups were found to purchase goods from suppliers at significantly lower prices (based on the top five branded lines of 26 large suppliers).
“We believe it is highly unlikely that the current big four supermarkets would have ceded that advantage, especially as they have grown their overall market share so dramatically in the last five years. It also flies in the face of wholesalers’ widespread anecdotal experience that large differentials exist.
“Although the Commission says it will seek to review additional data for other suppliers, FWD will push to ensure they do a comprehensive job.
“To put this in context, the amount of data that retailers and wholesalers were asked for was enormous – and included records of prices and margins on every line sold on three separate dates in the last 12 months.
“The CC makes several mentions in the emerging thinking of its need for more information from suppliers. FWD agrees this is necessary and believes that the simplest way to check for evidence of abuse of buyer power is by extracting evidence on pricing from suppliers’ records,” Murphy concluded.

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