CC issues final report on UK retailing

The UK’s Competition Commission (CC) has published its final report in its inquiry into UK groceries retailing.

The report includes measures to improve competition in local areas and to address its concerns about relationships between retailers and their suppliers.

The measures include:

A recommendation for the inclusion of a 'competition test' in planning decisions on larger grocery stores;

Action to prevent land agreements which can restrict entry by competitors;

The creation of a new strengthened and extended Groceries Supply Code of Practice

“Our conclusion that this is a generally competitive market is not inconsistent with the possibility of some occurrences of anti-competitive behaviour.

Peter Freeman, chairman of the CC

A recommendation to establish an independent Ombudsman to oversee and enforce the Code.

In its final report, the CC has concluded that, whilst UK grocery retailers are, in many respects, delivering a good deal for consumers, action is needed to improve competition in local markets and to address relationships between retailers and their suppliers.

Peter Freeman, chairman of the CC and inquiry group chairman, said: ‘Some aspects of the way retailers deal with their suppliers could, if left unchecked, harm consumers. The changes to the existing Code of Practice, along with the recommendation of an independent Ombudsman to police the code, aim to improve the existing system by making it more robust and proactive in tackling those practices which can damage investment by suppliers.’

Freeman continued: ‘Competing with large retailers is difficult but our evidence does not show that independent retailers or the wholesalers that supply them are in terminal decline. It is not impossible for them to compete and in the current economic climate the benefits of vigorous competition are as relevant as ever.’

The CC also said there are a significant number of local areas where larger grocery stores face limited competition and local shoppers lose out. Freeman commented: ‘That is why we want to see the introduction of a competition test as part of the planning regime to prevent local areas developing like this in the future. We are also taking action to prevent retailers using restrictive covenants and other agreements to frustrate entry by competitors in such areas.’

Referring to the Office of Fair Trading’s own investigation into possible price fixing in the sector, he commented: ‘Our conclusion that this is a generally competitive market is not inconsistent with the possibility of some occurrences of anti-competitive behaviour, either now or in the future, and it is quite right that such allegations are thoroughly investigated.’