Probe into retailers' power

25 April 2007
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26 April 2007 | Antony Barton and Paul Snell

Measures designed to cut supermarkets' buying power last week received a mixed response from business groups representing buyers and suppliers.

At the centre of the debate is a proposal from the New Economics Foundation (NEF) for the introduction of an independent watchdog to monitor the behaviour of supermarket buyers. It said a "retail monitor" could arbitrate in relationships to ensure fair deals and reduce the need for lengthy investigations.

The National Farmers' Union welcomed the idea, describing it as a good method of enforcing rules and highlighting best practice.

The Forum of Private Business also told SM a watchdog would help limit the use of huge buying power to squeeze suppliers.

But the British Retail Consortium rejected the idea. In its view, the existing competition in the grocery market meant there was no need for a regulator. The Federation of Small Businesses added a third party would not be necessary if the current enquiry into grocery markets by the Competition Commission had a broader remit.

The NEF has also criticised the commission's enquiry. It said the commission had failed to interview sufficient suppliers and was in danger of ignoring evidence of the anti-competitive nature of the market.

Andrew Simms, NEF's policy director, said: "If the commission can't do its job and put in place the checks and balances that could ensure genuinely open markets, people will be justified in questioning exactly what the commission is for."

Three major supermarkets - Asda, Morrisons and Tesco - refused to comment on the idea. A statement from Sainsbury's said: "An OFT compliance audit has stated we deal with suppliers in a fair and reasonable way. We were one of the first retailers to instigate a Supplier Code of Practice and we believe suppliers would be well served by the expansion of this code to include more competitors."

The buying power of the big supermarkets was raised again last week, as Tesco announced annual profits of £2.5 billion, which it attributes in part to better purchasing and sourcing. It said pan-European purchasing of fresh produce and own-brand products had increased competitiveness in Europe outside the UK.

See News Focus.

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