Stop Safeway stitch-up, alliance demands

31 January 2003

The Trade and Industry Secretary Patricia Hewitt has been urged to order a full Competition Commission investigation into the bids for the Safeway supermarket chain, without delay. The demand was set out in a letter signed by a diverse alliance of organisations concerned by the impact of increasing the market power of the big supermarket players. The letter is being delivered on the last day for comments from interested parties on the bids, made by Morrisons, Sainsbury's and Asda. Comments on the Tesco bid can be submitted for a further week.

The group, which includes the Institute of Asian Businesses, the National Federation of Women's Institutes, the British Independent Fruit Growers, the National Consumer Federation and Friends of the Earth, are concerned by speculation that the rival supermarkets are finding ways to avoid a referral to the competition authorities. In the letter they ask the Secretary of State to make an early statement confirming that the bids will be referred and to make it clear that any mergers or takeovers which are shown to be against the public interest will be prevented.

The Office of Fair Trading is currently looking into aspects of the bids in order to make a recommendation to the Secretary of State about whether each one needs further investigation. The supermarket bidders are believed to be hoping to avoid an investigation by selling off some of the Safeway stores. But this would not address the fundamental issue of further market concentration at the national level and the resulting additional buyer power that the merger would give the successful bidder, allowing them to strike harder deals with their suppliers.

A recent investigation by the Competition Commission found that the existing market power of the biggest supermarkets already enables them to engage in practices which are anti-competitive and against the public interest, including the way in which they deal with their suppliers, and issues relating to pricing of their goods. No action has been taken to address the problems relating to pricing practices, and the Code of Practice, introduced last year to protect suppliers, is widely believed to be ineffective.

This failure to deal with problems arising from the existing grocery market make it hard to see how the Secretary of State can justify allowing any of the rival supermarkets bids to take over Safeway without an investigation, given the resulting increase in market concentration.

Nineteen organisations have signed the letter stressing that important issues will not be addressed unless the bids are referred to the Competition Commission. These include:

• The ability of smaller supermarket chains, independent retailers and community pharmacies to compete at local, regional and national levels; and the related impacts on local economies.

• The impact on suppliers, particularly small businesses and farmers, due to increased buying power.

• The effect on consumer choice directly due to removal of one company from the market, and indirectly due to increased buyer power resulting from the takeover, which may result in loss of smaller retailers and in reduced innovation by suppliers.

• The impact on access to a healthy diet, eg through price wars targeting the least wholesome products, further erosion of local supplies in urban and rural communities, and reduction of outlets accessible without a car.

"We already know that the supermarkets are abusing their power and acting against the public interest. The Government must demand a full investigation by the Competition Commission of any merger or takeover which strengthens this power. In the interests of customers, small businesses and farmers, the Government must stop supermarket bidders dodging the system by making it clear now that they will all be referred to the competition authorities," said Friends of the Earth Food and Farming Campaigner, Sandra Bell.

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