The Competition Commission has stated that it needs to gather more evidence at a local level before reaching firm conclusions about the grocery market. David Rees and Rich Airey report

After eight months of work, the Competition Commission has yet to be persuaded that there is any evidence of a heavily distorted grocery market, but the panel has at least decided that it needs to focus on retailing at ground level before making its final report.
Speaking at the launch of its emerging thinking document, inquiry group chairman Peter Freeman said: "It would be a cause for concern if supermarkets, either individually or collectively, were in a position to increase prices or lower their offer in any particular locality or region because of lack of effective competition."
He added: "We are not here to punish success, but we are concerned with whether Tesco, or any supermarket, can get into such a strong position that no other retailer can compete effectively."
Campaigners for the independent trade were encouraged that the doors remain open for a detailed investigation of the multiples' activities.
ACS chief executive James Lowman said: "We strongly believe that practices such as below-cost selling and price-flexing are targeted in a predatory manner and have the effect of closing smaller competitors. We will be helping the Commission to consider this issue in far more detail, and believe that it will conclude that these practices remove competition from the market place and are harmful to consumer choice."
Much evidence of local price-flexing or planning trangressions has already been sent to the Commission, with three cases brought to the fore.
Case Study 1 - Proudfoots
Tesco opened a 16,000sq ft store in Withernsea, East Yorkshire, close to a supermarket operated by Nisa member Proudfoots.
The supermarket giant launched an aggressive price and promotional campaign, posting vouchers to every home in the catchment area offering £8 off purchases of £20 (excluding tobacco) for a month. It even put up advertising outside the Proudfoots store.
Director Ian Proudfoot said that his research revealed that the Withernsea Tesco's prices were the cheapest in the country when it opened. During the voucher promotion, his store's sales fell by nearly a third.
Case Study 2 - Tuffins
A Tesco leaflet drop, offering shoppers a 30% discount at its Ludlow store, coincided with the opening of a new Tuffins store in the same Shropshire town this month.
Tesco denied that the vouchers, which offered shoppers £10 off when they spent £30 or more and covered a 10-mile radius of the town, were linked to the Tuffins opening. The supermarket said the vouchers were a promotion linked to a refurbishment of its own store in Ludlow, which was completed in November 2006.
Harry Tuffins managing director Paul Delves retorted: "I think the fact Tesco is saying the leaflet drop was an unfortunate coincidence is total rubbish. If that's the case then why did the leaflet drop not take place in November last year when its store was refurbished? It was not even a targeted drop of loyalty card holders. I've had lots of customers telling me that they rarely shop in Tesco and are not Clubcard holders."
He added: "Despite the discount being offered by Tesco, I'm still really happy with our opening. We're hoping there may have been a bit of a backlash against the supermarket. Having said that, without the vouchers our sales may have been even stronger."
Case Study 3 - Stockport
Tesco overbuilt a new store in Stockport by 20,000sq ft, and then sought retrospective planning permission for the extended area.
The issue dragged on for two years before the local authority eventually gave in, but it condemned Tesco's tactics in a council meeting. A 6,000sq ft area remains cordoned off, but Tesco is trading normally from the rest of the site.
Local wholesaler Steve Parfett commented: "If we had behaved in such a way, the authorities would have come down on us like a ton of bricks. Tesco intimidated the council by bombarding them with documentation."

Administrative timetable

May 9 2006 - Reference made by OFT
January 2007 - Commission makes notification of emerging thinking
March/April 2007 - Further hearings with parties
May 2007 - Deadline for all parties. Responses required before provisional findings
June 2007 - Notify provisional findings
August/September - Report if no adverse effect on competition; or remedies hearings if required
October 2007 - Final deadline for all parties' responses/submissions
November 2007 - Publish report.

Members of inquiry

Peter Freeman, chairman of Competition Commission, solicitor and previously head of the EC and Competition Law Group, Simmons and Simmons
Jayne Almond, chief executive of specialist mortgage business Stonehaven
Barbara Donohue, senior banker
Alan Gregory, professor of corporate finance at Exeter University
Alan Hamlin, professor of political theory and director of Manchester centre for political theory at University of Manchester
Bruce Lyons, professor of economics at University of East Anglia.

Competition Commission findings reaction

James Lowman, Association of Convenience Stores:
"What is clear from the emerging thinking is that in some areas the Commission still needs to go out and find crucial information. For example, their analysis of the relationship between retailers and their suppliers has not gone far enough. They must probe this issue much further to fully understand how buying power operates and how it ultimately damages competition and the consumer."

James Hall, Best One controller, Bestway group:
"The supermarkets' whole agenda needs to be addressed. I'd like to see the commission tackle everything from pricing through to landbanks and planning issues. "

Clive Davenport, Federation of Small Businesses:
"We have serious concerns about reports of blatant abuses of the planning system by supermarkets, which the Competition Commission has failed to address in numerous inquiries in the past. This time around no stone should be left unturned and offenders should be brought to book.
"It is essential that the Competition Commission does its job properly to stamp out unfair or illegal competition. On the evidence of the initial findings, it does not look promising."

Arjan Mehr, Londis, Bracknell, BERKSHIRE:
"Competition at the moment is severe. We've got two large supermarkets, Tesco and Sainsbury's, with two stores each nearby, and also a Morrisons. That's far too much for a town the size of Bracknell and that's not including all the petrol stations that have been bought up by the supermarkets. I'm not afraid of competition, but I want fair competition. It helps being part of a symbol group but it's still tough. If the supermarkets are allowed to exert any more pressure it would be devastating."
Robert Byford, Byford's Foodhall, Leigh-on-Sea, Essex:
"Tesco seems to be buying up everything in our area. The garage next to us is still independent but there have been rumours that Tesco could move in. That would be a major concern. It seems to be so ruthless. The major worry for me is the way in which it deals with planning. There's a Tesco being built about a mile away. The stores seem to be getting closer and closer."

Geoff Hallam, managing director, Tates:
"It's very difficult to compete with the supermarkets. The main problem is getting a fair price from our suppliers. We've put forward what we think and now we need to concentrate on getting the things that we've got control over right. The way I look at it is we've got lots of issues to deal with within our own business and I want to concentrate on what I can directly influence."

Pete Cheema, Spar, Meigle, Dundee:
"I welcome the fact that the competition is looking at the situation and hope that now the inquiry is going to a local level it should find the problems that exist. From planning and competition, through to land banks and pricing; everything needs to be addressed. We at the Scottish Grocers' Federation will be fighting for the c-store corner."

Paul Delves, managing director, Harry Tuffins:
"The dominance of the supermarkets needs addressing across the board. It's like Chelsea and the Roman Abramovich effect. If the likes of Tesco want something then they will eventually get it. Where local stores have got a big plus is the fact we trade locally with local companies. We are members of Nisa but we also work a great deal with local suppliers and craftsman, which directly benefits the local economy."