The Federation of Wholesale Distributors has welcomed the Office of Fair Trading’s announcement that it is minded to refer the grocery market for a full review by the Competition Commission.
“This is an unexpected but extremely welcome volte-face by the OFT. They seem to have ticked all the right boxes this time by calling into question the most damaging aspects of unbridled superstore expansion,” said John Murphy, FWD’s director general.
“Crucially, they have picked up on our argument that the market is dangerously skewed by the big fours’ buyer power, which has increased significantly since the last review in 2000. Wholesalers cannot achieve comparable prices for like for like volumes to those extracted by the superstores and this distorts our independent retailer customers’ ability to compete,” he added.
Recently, FWD offered to open wholesalers’ books to the OFT’s auditors so that they could compare wholesalers’ buying prices with those achieved by the multiple supermarkets for similar quantities of goods.
“They refused this opportunity on two occasions, but now we would expect the CC to go down this route. We contend that this relatively simple exercise will provide conclusive proof of the unfair buying advantage that the supermarkets are allowed to employ in their predatory incursions into the convenience market,” said Murphy.
He also noted that FWD’s calls for a moratorium on superstore acquisitions of convenience stores while the review was taking place had not been accepted.
“We still maintain that it is imperative that the status quo in the grocery market is maintained during the lengthy review process, and that any further ‘creeping’ acquisitions by the big four into the convenience market must be ruled out,” Murphy said.
He pointed out that the previous investigation into the market took nearly a year and a half, from March 1999 to July 2000, and was principally focused on buying practices. If the new investigation is given a wider brief it could easily take two years, he said.
Even if it does then come up with curbs on major multiples buying local stores, it may be a case of shutting the stable door after the horse has bolted.