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Competition Commission backs down over supermarket planning recommendations

Feb 15 2008

Friends of the Earth has welcomed the Competition Commission's decision to drop controversial proposals to make it easier for supermarkets to build more edge of town and out of town stores.  The environmental charity has been campaigning against these proposals since they were first set out in October 2007. However, they are warning that proposals to introduce a competition test into the planning system will do nothing to promote real diversity in our towns and cities [1]. 

The Competition Commission's suggested remedies include further measures that Friends of the Earth has been campaigning for: a much tighter Code of Practice to stop unfair costs and risks being passed on to farmers and other suppliers and the appointment of an ombudsman to oversee the Code.  However, it is essential that the proposed ombudsman has sufficient powers to enable it to ensure that the Code is adhered. [2].  

Friends of the Earth supermarket campaigner Sandra Bell, said:

"The Competition Commission's proposed remedies will help farmers provided that the ombudsman is given sufficient powers to deal with the supermarkets' bully behaviour"

"The competition test recommended by the Competition Commission will do nothing to help local shops or to promote real retail diversity.  Unless it is combined with strengthened planning rules to restrict supermarket expansion it could simply mean that we get more big supermarkets being built next to each other"

Notes

[1] The Competition Commission's analysis and subsequent recommendation on planning:

• Focuses solely on choice between big stores rather than the overall diversity of the retail offering. 
• Fails to do anything to stop the decline of local shops: on average between 1999 and 2007 each location the CC looked at lost one specialist shop - reducing choice.
• Does nothing to stop the rapid expansion of big supermarkets despite its own findings that two new supermarkets already open every week and that when a new supermarket opens, greengrocers and markets are more likely to go out of business.
• Fails to make recommendations to stop practices such as below cost selling which undermine local retailers despite noting that below cost selling by supermarkets may have caused a high number of off licenses to close between 2003 and 2004. 

[2] In its Provisional Findings the Competition Commission acknowledged that supermarkets pass risks and costs onto suppliers which could cause problems in the future.   Friends of the Earth's research showed that dairy farmers find it hard to invest in their business, including environmental measures, due to long-term price squeezes from supermarkets: www.foe.co.uk/resource/media_briefing/farmers_speak_out_over_the0.pdf (PDF†)

A Supermarket Code of Practice aimed at protecting suppliers was introduced in 2002 as a result of the previous Competition Commission inquiry.  Soon after its introduction it was clear that the Code was too weak.  The current inquiry has confirmed that the Code has failed to stop unfair trading practices. 

Friends of the Earth has also been campaigning for the appointment of an ombudsman to oversee the grocery market.   Today's announcement of an ombudsman to ensure that supermarkets do not pass unreasonable risks and costs to suppliers is welcome but it must have sufficient powers and resources.  One of the key reasons for the failure of the existing Code of Practice is suppliers' fears of raising complaints.

For an ombudsman to be effective it must have powers to:

• proactively gather evidence from suppliers instead of simply waiting for complaints to come forward
• investigate harmful practices without having to identify individual suppliers
• make changes to the Code of Practice if new abuses of power arise

†To view PDF files you will need to download Adobe Acrobat Reader. Visually impaired users can get extra help with these documents from access.adobe.com.

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