Competition Commission gets tough on supermarkets

The Competition Commission (CC) today released the first comments from its investigation into supermarkets and has said that it will not tolerate an abuse of dominant position.

The CC’s chairman, Peter Freeman, said in a statement: “We are not here to punish success or individual retailers but 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.”

Three-quarters of the grocery market is controlled by the “big four” supermarkets: Asda, which instructs Slaughter and May; Linklaters’ client Sainsbury’s; Morrisons, which uses Ashurst; and Freshfields Bruckhaus Deringer client Tesco.

Tesco now controls one-third of the UK market and also has the largest “land-bank”, or supply of undeveloped real estate.

As first reported in The Lawyer (10 July), the CC is also looking into contracts in North Norfolk that Berwin Leighton Paisner (BLP) drafted for its largest client Tesco.

One City competition partner who is representing a minor supermarket said: “The CC has been careful not to single out any chain but it is true that in the area of land and planning Tesco has the most to lose from any potential remedy because they have the largest land bank.”

Land use was just one area of concern flagged by the Office of Fair Trading (OFT) when it referred the supermarkets to the CC in March 2006. Other problematic areas were predatory pricing, relationships with suppliers and entry into the convenience sector.

In the supermarkets’ relationships with suppliers, the CC warned of a “climate of fear”. However, in today’s comments it became clear that the CC had not received enough supporting evidence from suppliers.

Said one competition partner: “That could be because of this climate of fear. It’s one thing to say: ‘We’re being bullied,’ but it’s quite another to stand up and give detailed evidence about it.’”

The big supermarkets’ relationships with dairy and pig farmers in particular were of concern to the CC, but again, it appealed to farmers to come forward with specific complaints.

The general view was that the CC’s initial thoughts were unsurprising. The investigation, the third into the sector in six years, will not finish until June.