Small stores went to the doctor - and came away feeling worse. How did the Grocery Market Inquiry lose its way so spectacularly?
The Competition Commission's remedies to cure the grocery market's ills will have left independent retailers feeling like a man with a headache who has been prescribed a course of head-banging.
To the dismay of many, the Inquiry team is within a breath of declaring that the best way to curb the monopolistic tendencies of supermarkets is to build more supermarkets.
"It seems incredible that their answer is to come to the aid of the biggest retailer in the world, as if it couldn't compete on its own," says NFRN national president Colin Finch, pointing out that it is Wal-Mart subsidiary Asda which is most likely to benefit from what amounts to little more than a realignment of market share among the Big Four. Indeed, Asda responded to the remedies by announcing plans for 22 new stores and 12 extensions in 12 months.
Winners and losers
"They've come up with the one solution that requires more supermarkets to be built, and the battleground will be the smaller market towns which haven't already been saturated by multiples," Finch adds. "If this is allowed to happen, within a few years we may see the convenience sector consolidate into a few big chains, and perhaps 25% fewer retail outlets, with independents the big losers."
In its defence, the Commission has said all along that whatever the intention behind the original OFT referral, its job was not to protect one set of retailers from another but to ensure that consumers have sufficient choice of outlets. But its remedies call into question not only its interpretation of the public's definition of choice and diversity, but also its understanding of the evidence.
ACS public affairs manager Shane Brennan says the remedies offer no solutions to the market's problems. In its final submission to the Inquiry this week, the Association has asked the Commission to reconsider its 'competition test', which it intends as a control only on stores over 1,000sq m, and its suggestion that 60% of local market share represents a dominant position, while European law puts the figure at 40%.
"We feel that the suggested extension of the Code of Conduct risks a repeat of mistakes in the previous inquiry," says Brennan. "The Code should be concerned with the relationship between supermarkets and their suppliers. It is the actions of the Big Four that need to be remedied. We will urge the Inquiry to concentrate on the content of the Code, not its scope."
Dr Allan Hallsworth, reader in Retailing at the University of Surrey, says: "The findings are based on the premise that supermarkets are good for consumers, and that low price leads to choice. That is not a reflection of the way people want to shop. There's also a political aspect here - does the government want a retail system which will consistently see UK suppliers going out of business?"
He also points out that the Inquiry has taken a "snapshot" look at an ever-changing market. "Two events which will soon have a significant impact on the market - the expected break-up of Somerfield and the Sustainable Communities Act - are not considered. The report risks being redundant on the day it is published," he adds.
Hallsworth mentions that when the ACS first called on the OFT to refer the market to the Competition Commission, they were told: "Be careful what you wish for". So has the whole experience backfired on the small shops sector?
"Absolutely not - it was the right thing to do," says Brennan. "The process has significantly affected how the market works over the past two years, and the evidence of the problems that we have outlined is there to see. If the result is not what we wanted, it is because the Commission has failed to act on the evidence it has collected."
The Competition Commission's remedies to cure the grocery market's ills will have left independent retailers feeling like a man with a headache who has been prescribed a course of head-banging.
To the dismay of many, the Inquiry team is within a breath of declaring that the best way to curb the monopolistic tendencies of supermarkets is to build more supermarkets.
"It seems incredible that their answer is to come to the aid of the biggest retailer in the world, as if it couldn't compete on its own," says NFRN national president Colin Finch, pointing out that it is Wal-Mart subsidiary Asda which is most likely to benefit from what amounts to little more than a realignment of market share among the Big Four. Indeed, Asda responded to the remedies by announcing plans for 22 new stores and 12 extensions in 12 months.
Winners and losers
"They've come up with the one solution that requires more supermarkets to be built, and the battleground will be the smaller market towns which haven't already been saturated by multiples," Finch adds. "If this is allowed to happen, within a few years we may see the convenience sector consolidate into a few big chains, and perhaps 25% fewer retail outlets, with independents the big losers."
In its defence, the Commission has said all along that whatever the intention behind the original OFT referral, its job was not to protect one set of retailers from another but to ensure that consumers have sufficient choice of outlets. But its remedies call into question not only its interpretation of the public's definition of choice and diversity, but also its understanding of the evidence.
ACS public affairs manager Shane Brennan says the remedies offer no solutions to the market's problems. In its final submission to the Inquiry this week, the Association has asked the Commission to reconsider its 'competition test', which it intends as a control only on stores over 1,000sq m, and its suggestion that 60% of local market share represents a dominant position, while European law puts the figure at 40%.
"We feel that the suggested extension of the Code of Conduct risks a repeat of mistakes in the previous inquiry," says Brennan. "The Code should be concerned with the relationship between supermarkets and their suppliers. It is the actions of the Big Four that need to be remedied. We will urge the Inquiry to concentrate on the content of the Code, not its scope."
Dr Allan Hallsworth, reader in Retailing at the University of Surrey, says: "The findings are based on the premise that supermarkets are good for consumers, and that low price leads to choice. That is not a reflection of the way people want to shop. There's also a political aspect here - does the government want a retail system which will consistently see UK suppliers going out of business?"
He also points out that the Inquiry has taken a "snapshot" look at an ever-changing market. "Two events which will soon have a significant impact on the market - the expected break-up of Somerfield and the Sustainable Communities Act - are not considered. The report risks being redundant on the day it is published," he adds.
Hallsworth mentions that when the ACS first called on the OFT to refer the market to the Competition Commission, they were told: "Be careful what you wish for". So has the whole experience backfired on the small shops sector?
"Absolutely not - it was the right thing to do," says Brennan. "The process has significantly affected how the market works over the past two years, and the evidence of the problems that we have outlined is there to see. If the result is not what we wanted, it is because the Commission has failed to act on the evidence it has collected."
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