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Competition Commission slams supermarkets

Published:  23 July, 2008

The next phase of the Competition Commission's probe into the grocery industry will focus on competition at the local level, where it most matters to consumers', the chairman, Peter Freeman, said when outlining the watchdog's preliminary thinking'.

Tesco, Sainsbury, Asda and Morrisons control about 75% of the UK market, with Tesco accounting for 1 in every 3 spent in the UK on food.

The commission is expected to publish its full report next year, but Freeman said it was not the intention to punish' grocers. However, the commission is worried about whether Tesco or any other supermarket' could become so strong that no other retailer could compete effectively.

Freeman said the commission would focus on the choices shoppers had in particular areas and how competition works between different-sized retailers.

He said, Bigger buyers do not always appear to get better terms form suppliers', but the commission said it would be concerned 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'.

It went on to say that the larger stores constrained the prices, product range and service of smaller stores' and that below-cost selling may unintentionally contribute to the exit of smaller retailers and specialist stores'.

Both Sainsbury and Asda have called for planning controls to be relaxed, which would allow them to build more out-of-town stores and enable them to compete more effectively with Tesco.