Commission puts Tesco in the spotlight
In its initial report on the £100bn a year grocery market, the commission today expressed concerns that choice in some areas is being held back by the lack of effective competition, although it said it had failed to uncover any widespread problems in the supply chain.
While stressing that the commission is not out to "punish success or individual retailers", chairman Peter Freeman said. "We are concerned with whether Tesco, or any other supermarket, can get into such a strong position, either nationally or locally, that no other retailer can compete effectively."
Sandra Bell of Friends of the Earth called on the commission to take tough action: "If supermarket growth continues unchecked we are in danger of becoming a nation of Tescos instead of a nation of shopkeepers."
Steve Davies at Numis, however, said that while the report did not appear to contain anything "earth-shattering", the commission "is clearly going to be focusing closely on Tesco and whether it has such strong positions in local markets that competition is adversely affected."
Tesco welcomed the commission's initial thoughts and said it was confident of a satisfactory outcome for the company. "I am very confident that once they look at all of the evidence they will find, as they have in previous years, that our industry is competitive and good for consumers and will remain so in the future," Chief Executive Terry Leahy said in a statement.
Mr Freeman said today the commission had decided to focus on competition between retailers at the local level because that is "where it most matters to consumers". He said: "We know about the extent of retailers' land holdings, but it's how these are used at local level, and the related effect of the planning system, that matters. 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."
Its initial findings confirmed that Tesco holds most land, but it pointed out that other retailers are actively increasing their holdings. Today's so-called "emerging thinking" document outlines the progress of the inquiry to date and does not detail any action that might be taken by the Competition Commission. Its findings do reveal deep concerns about how Tesco 'can get into such a strong position, either nationally, or locally, that no other retailer can compete effectively'. There will be a further round of hearings and its provisional remedies will be published in June.