Archived press release

OFT calls for investigation into supermarket power

9 March 2006

Friends of the Earth today (Thursday 9 March) welcomed the proposal from the Office of Fair Trading (OFT) to refer supermarkets to the Competition Commission for a new inquiry and called for the Commission to be thorough but swift in its investigation.

The decision to propose a new investigation into the power of the biggest supermarkets comes over a year since Friends of the Earth, the Association of Convenience Stores, the National Federation of Women's Institutes and FARM called for it in a submission to the Office of Fair Trading. The OFT has now agreed with several of the groups' key points.

But Friends of the Earth added that there were still some serious omissions in the OFT's report including the issue of supermarkets moving into non-food markets and the impact on suppliers. Friends of the Earth is concerned about the number of British farmers going out of business as a result of supermarket practices. The environment group said that if the OFT accepts there is increased consolidation and concern about increased buyer power, it follows that the ability to squeeze suppliers is also increased and must be looked at again by the Competition Commission.

Friends of the Earth Supermarket campaigner Sandra Bell said

"The Office of Fair Trading's decision is good news for consumers and for the high street. Ithas finally accepted that there are problems resulting from the growing dominance of the big supermarkets.It is now crucial that the Competition Commission proceeds with its investigations urgently and focuses on finding solutions that will increase consumer choice by encouraging real diversity in our high streets. It must also be charged with finding new solutions to protect our hard pressed farmers from supermarket bullying."

The OFT has accepted the group's main contention that consolidation in the grocery market could be bad for consumers. It accepts that there is evidence that the take over of convenience stores, and the practices of below-cost selling and price flexing can distort competition and it concedes that a supermarket's dominance in a local market may damage consumer choice. The OFT has also now highlighted the potential for the planning regime to impact on the high street. This followed a further submission from Friends of the Earth on planning and was a significant change from August 2005 when it claimed that planning was not an issue for the competition authorities.

The decision to propose an investigation is a major change from the OFT's previous position in August 2005 that there was no evidence of practices adversely affecting competition or harming consumers. The OFT was forced to re-consider its position following a legal challenge led by the Association of Convenience Stores and backed by Friends of the Earth.

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Published by Friends of the Earth Trust