The results of the two-year long Competition Commission inquiry have been released, and supermarkets can breath a sigh of relief. It has revealed that the major UK supermarkets; Tesco, Sainsbury’s, Asda, Safeway and Somerfield, do not make excessive profits, but they must agree to a new code of practice in their dealings with suppliers. Larger chains will also have to get approval from the director general of Fair Trading before buying or developing new stores, which are near existing outlets.
The Office of Fair Trading has three months to draw up the new code of practice, which will deal with the relationship between the five supermarket chains and their suppliers. It was prompted by concerns that the larger chains were pressurising small producers and manufacturers to accept low prices. Legally binding agreements will ensure that the retailers stick by the code.
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Since the inquiry was launched food prices have dropped, largely in response to supermarket fears of condemnation, and this led the commission to condemn below cost selling. Marketing director at Tesco, Tim Mason, explained: “When this enquiry was started, the worry was that prices are too high, what we actually ended up being criticised for was that prices are too low. It [below cost pricing] simply demonstrates what a competitive industry this is. Nobody likes it and nobody does it for long. Profits are not excessive.”
