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Supermarkets are to face public shaming and huge fines if they use their size to force down prices paid to their suppliers, the Competition Commission will announce today.
The commission will recommend the appointment of a statutory regulator to judge pricing disputes between retailers and farmers, dairy companies, abattoirs, food processors and packers, The Times has learnt.
However, supermarkets have threatened to pass the cost of the new controls on to customers in higher prices, at a time when the cost of living is rising.
As part of the revolutionary proposals – dubbed “Offshop” – a competition test will be put in place before planning authorities can grant permission for a new store.
Councils will have to take into account whether one supermarket chain is dominating an area – so-called “Tesco towns” – before granting the go-ahead for a new store.
The new ombudsman’s office is one of a package of measures to be announced today by the watchdog after a two-year inquiry into the £123 billion a year UK grocery market and the 75 per cent market dominance of the big four companies – Tesco, Asda, Sainsbury’s and Morrisons.
The current voluntary code will be extended to include other high street chains such as Waitrose and Marks & Spencer.
The new regulator is expected to have the power to name and shame, and fine companies guilty of sharp practices such as price cuts for unsold goods, charging new products for shelf space and pay-to-stay fees to keep goods on shelves.
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Why does government always find a reason and way to meddle in something that is not a problem. Over the past 15 to 20 years the UK has been well served by the supermarkets in terms of choice, quality and cost. A regulator is an added layer of cost and protectionism for groups who are already heavily subsidized . In the end "If it aint broke, don't fix it". The current structure has been highly competitive and served the public well!
JJ, Epsom,
As Thatcher knew only too well and the Supermarkets bank on it, the British public are greedy and can be easily bought. Few give a damn about cheated farmers, closed local shops or suffering animals. Another cut price item is the spur and the unsavoury actions of the big players will continue as those that have no shame cannot be shamed.
mike gee, bournemouth, uk
This is bizarre. The essence of competition is offering the customer a better deal than your competitors. Extracting the best deal from your suppliers increases efficiency and productivity amongst suppliers and leads to lower prices for consumers. This is what competition policy should aim for - it's role is not to protect those who are less competitive, wherever they are in the chain.
Faustino, Brisbane, Australia
Easy answer. If you disagree with supermarket policy, every market town has a Saturday market where you can by-pass the big boys and usually pick up local(-ish) produce. Use it and you help your neighbour. Use the supermarket and you help global warming.
KR, Stockport,
Supermarkets are run by a bunch of con-artists who should be jailed for some of the strokes they pull. When caught out they always give the same lame response that they are only giving their customers what they want. Well I can never remember asking for the price of goods to bouble, over a few weeks, then be offered two for one, just one of the con's they pull all the time.
D Case, Newquay,
I cant quite see the point of giving Local Planning Authorities the power to decide whether they are or arent happy with a planning application from, say, Tesco. All Tesco would have to do would be to put in an application in the name of an ad hoc "front" retailer with a different name - Bloggs Grocers - who then get planning consent. Later, Bloggs sell to Tesco, and the Council could do nothing about that. Or, is it being suggested that Councils get to veto sales of commercial properties where there is no change of use? I cant imagine any Council being able to - or wanting to - get involved with that.
Gerald Hirsch, Knowle, Devon
Until I see farmers regularly riding pushbikes I'll reserve my sympathy.
There is a very simple way to deal with this problem. That is to make it a criminal offense for a supplier to overcharge small retailers. Discounts to the large concerns would than have to be justified.
To be recognised as a small business one would have to be registered for Tax - this would also help to stop the black economy driving small shops out of business.
I would also include a simple re-rating of commercial properties. Small businesses with less than 10 employees could only be charged at the lowest rate per square metre that is charged to the likes of the multiples. This is another hidden injustice.
Let's really have a level playingfield.
JDS, Cardiff, Wales
The supermarkets have flourished thanks to putting themselves in the position of being the only show in town where farmers are concerned. As a result they have been able to turn the screw; not always in the interests of even lower prices but often even higher margins. Now things are beginning change as more and more agricultural land is being turned over to the production of crops for the bio-fuel trade.
This has been evident in the sharp rise (7.4% last year) in the cost of food overall and higher prices still can be expected this year as a result. In addition the growing strength of this trade will be giving many farmers the opportunity to indulge in some pay-back for the way they have been treated in the past. I know that if I were a farmer I would be straining at the leash on that front.
figurewizard, Hampshire, UK
I would rather pay higher prices for fresh, local produce in the knowledge that farmers and suppliers are getting a good deal. Whenever you see people complaining that they can't afford fair trade or fairly sourced produce, they are overweight with trolleys loaded down with junk food. If they ate less rubbish, they would have more money to spend on decent food that is fairly priced. And they would be healthier.
Anon, London, England
Food is too cheap in this country anyway.
Oh, the rising prices... it's not as if there are any starving poor in this very developed (over- developed looking at everyone's bottoms) nation. Maybe it would tackle obesity rates as well as underfunded home growing farmers! Hurrah!
Saki B, London,
Surely the UK grocery market is well in excess of £1.23 billion?
John Murphy, Chadderton, Lancs.
Frank doesn't know what he is talking about. The whole point of regulating the groceries business is because there is an abnormal situation of oligopoly (for the uninitiated, a stitch up) that is PREVENTING market forces from working properly. To say the consumer will pay more is not necessarily true - it could just be the supermarkets' enormous profits that take a small hit. They can afford it!
Robert C, London, UK
Shoppers should not pay but the supermarkets should as they squeeze both supplier and consumer to make huge profits
william shepherd, zoeterwoude, nl
I don't agree about the bigger shop - more choice argument. I live in Lincoln, and have the choice of two Tesco in the City, A Tesco express in an adjoining town, and two further Tesco at nearby towns. The largest Tesco is 24 hrs and is regularly without some fairly basic items (well not exactly without, sometimes they can be found on the huge cages littered around the store waiting for one of the harassed staff members to come available to re-stock!), and to get some less popular items I have to travel to one of the smaller stores. All the larger stores is provide larger sections of shelf for each product.
Rick, Lincoln, UK
Price is certainly an important factor, but Quality is IMHO far more important. With regards to fresh produce, large supermarkets trade in volumes which require intensive production and/or an ecological footprint the size of a hole in the ozone layer to satisfy the needs of central purchasing bean counters.
By seeking locally produced, fresh, seasonal food from market stalls, small specialist stores, or any supermarkets which make the effort to source locally, the consumer wields the mightiest weapon of all in a market economy, that of consumer choice.
Connor, London,
Having forced most British mushroom growers out of business the Big Retailers are now in the process of killing-off the Irish growers. Don't be surprised if you start to see empty mushroom shelves in the near future, just as happened to two retailers in summer 2006. Empty shelves do not benefit anyone. Consumers - no product. Retailers - no profit. Growers - no future.
Jolly Roger, Cork, ROI
Frank, monopsony, like monopoly, is a prime case of structural market failure and therefore one of the few cases where regulatory intervention is perhaps sensible. Leaving it to the market works in most cases (so long as you can stomach the trade off between allocative efficiency and distributive equity, and I can) but where markets fail there question often arises: which is least worst, market failure or incompetent intervention!
Andy Grant, Kingston, UK
I agree with Frank, let the market forces sort it out. Intervention by the government always leads to negative unintended consequences. What will result from this? Higher prices to consumers, in a country where prices are already way too high. Most consumer items and supermarket goods are much cheaper in America, where the market is allowed to decide the outcome.
John D, London, UK
Our experience with Wal-Mart here in the USA (I believe the parent of Asda) is that yes, they put enormous pressure on suppliers...but also give their cost savings back to the consumer in the form of lower prices...
As a result they have broken the back of many a Main Street store and pay low wages to their employees - yet the low-end customer still shops there because their prices can't be beat.
Good and bad consequences as a result)...
Don't you think that it's better to let the market sort things out instead of protecting inefficient businesses? The customer benefits by having more money left-over to invest or save...
Frank, Dove Canyon, CA/USA
We only have a small Tesco Express where I live, would rather have a really big one for more choice. At least it's open 24 hours a day. Small shops suck, they never have everything you want, are more expensive because they get worse deals from suppliers, and close at night.
Stephan, London,
It takes an American to spell it out!! Ima Ouldie from Illinois you are so right. I ran an independent family food business for 30 years successfully but could not compete with the giants of the food trade and when I decided to retire was told by so called customers 'what would they do without us'. I was too polite to tell them that patronising us a little more rather than rushing off to the out of town giants may have persuaded us to stay in business but we could see the writing was on the wall. As was rightly said you can't have it both ways and we were just another statistic of the small independent family grocers to close 'fings ain't what they used to be' and never will be again. One thing the giants cannot offer is expertise and knowledge by their staff, I never cease to be amazed with the lack of product understanding in their stores even of basic items by their staff, so educating people about what they eat won't happen. Jamie (Oliver) another challenge!
Ima Ouldie, UK
Beeson, Oxford,
How smart do you have to be to realize that the big stores are ruining the High Street stores because of their bulk buying power? This is plain economics! If you want to save the High Street stores STOP shopping at Tesco & All their Ilk! You know that People won't do this so Bob's your Uncle! Quit whinging about losing the small stores while you continue to shop at the Big Stores. You CANNOT have both at the end of the day! Britain as you know it is Almost GONE! Sorry to say that, but it's True!!
Ima Ouldie, Illinois, USA