Buying Up Britain - supermarket operations - Industry Overview

TRADING FAIR?

The Office of Fair Trading and the Monopolies and Mergers Commission have both examined the practices of the superstores in the past, yet with minimal change. By 1998, however, the demand for a full-blown inquiry had become irresistible. Parliament's Welsh Affairs Committee reported that the prices the supermarkets were paying to beef and lamb producers bore no relationship to the prices they charged their customers. A Liberal Democrat MP published a powerful report on competition in retailing. [39] Several national newspapers had run campaigns against high supermarket prices, and the wider social and environmental impact of the stores was at last being widely discussed. The Office of Fair Trading which had, in its own words, 'previously taken the view that the growth of the major supermarket groups has been to the advantage of consumers in terms of amenity, choice and most crucially prices' [40] was forced to act. It launched an eight-month inquiry into competition in the sector, and, in April 1999, conclude d that the superstores had a substantial case to answer. To many people's surprise, it referred the matter to the Competition Commission.

The superstores responded with alacrity. Having repeatedly assured the public that their prices were already as low as they could possibly go, they suddenly found room for massive reductions. Tesco slashed the price of over 1,000 brands by more than 10 per cent. The cuts, it claimed, would amount to some [pounds]250 million. Sainsbury marked down 1,500 lines, while Asda promised to reduce the price of 10,000 items by as much as 50 per cent by the end of 2000. Though he had previously argued that consumers were not being ripped off by the superstores, Archie Norman, the chairman of Asda, finally admitted that they were. 'The industry is where it deserves to be, and we have brought it all on ourselves... Nobody believes UI( prices are lower--we have lost that argument already,' he conceded. [41] The other superstores were furious that he had broken ranks.