Does the UK Need More Supermarkets?

Tesco

The Future?

Tesco’s is the UK’s leading supermarket, with an estimated market share of 31.5% Yesterday, the competition commission suggested that the Supermarket’s dominance was not due to unfair trading practices. After a long investigation of the  British supermarket industry, the Competition Commission have concluded:

  1. Supermarkets are not competing unfairly
  2. The dominance of big supermarkets does not preclude smaller grocery shops  from competing
  3. The planning process for new supermarkets is too restrictive – What is needed is for a streamlined procedure to enable the building of more supermarkets, and not just on the edge of towns.
  4. The one area of concern was the practise of buying up land close to the existing supermarket. It is alleged that supermarkets often buy up land in close proximity to their new stores. This is to prevent new firms from competing.

Criticisms of the Competition Commission Report include:

  • They have focused on the benefits of cheap food, but have ignored other factors such as social responsibility and diversity.
  • The Report didn’t address the issue of Monopsony power. – This is the way supermarkets have allegedly been ‘bullying’ suppliers such as farmers. Farmers claim their profit margins have been squeezed by the combined market power of the Big Four.
  • Does the UK really need more supermarkets? – Supermarkets in the centre of town would make life more difficult for specialist shops.

Friends of the Earth, one of the groups which called for an inquiry by the Competition Commission in the first place, said:

“Today’s report is a totally inadequate response to the growing power of the big four supermarkets. The commission acknowledges that supermarkets bully suppliers and reduce consumer choice, but then bizarrely recommends making it easier for them to expand.”

 

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By on November 1st, 2007