review

We have now been given the benefit of the Competition Commission’s “emerging thinking” on its inquiry into the UK grocery market, so are we any the wiser? Well, yes, we are in some ways, but the document the CC published on January 23 was the quintessential Parson’s Egg for wholesalers – being quite good in parts and quite distasteful elsewhere.

Let us concentrate on the nastiest bit. This centres on the CC’s preliminary finding that larger grocery retailers do not enjoy consistently favourable price differentials from suppliers vis- agrave;-vis wholesalers. This is hardly credible and FWD is 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. Or if they did, they have not mined into that data sufficiently.

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 rushing to point out that this is in contrast to the findings of its 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 say it is difficult to believe that the current big four supermarkets would have ceded that buying 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. The simplest way to check for evidence of supermarket abuse of buyer power is by extracting evidence on pricing from suppliers’ records. The CC itself says that manufacturers may not be coming forward through fear of reprisals, so our solution would solve that problem at a stroke.

As to the good bits in the emerging thinking, 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. The war goes on.

Get Our E-Newsletter - Wholesale News stories in your in-box, delivered weekly.
Will be used in accordance with our Privacy Policy
Share.

About The Author