TESCO EXPANSION IN EVESHAM PROMPTS MP TO CALL FOR URGENT ACTION TO CONTROL “EMERGING MONOPOLY”
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TESCO EXPANSION IN EVESHAM PROMPTS MP TO CALL FOR URGENT ACTION TO CONTROL “EMERGING MONOPOLY”

The news that a Tesco Express store is now likely to open in Evesham’s Cheltenham Road has prompted the town’s MP to call for full and urgent implementation of all the recent findings of the Competition Commission’s recommendations on the grocery market.

Peter Luff, MP for Mid Worcestershire, made his call after learning of the successful planning application by the grocery giant and after reading news in the Sunday Times that the company planned a massive expansion of Tesco Express stores across the country.

Commenting, Peter said,

“Obviously I am deeply concerned for the future of the Blue Bird Stores and Cheltenham Road Post Office. It would be truly terrible if the town now lost this combined post office and shop after the outrageous closure of Bengeworth post office.

“But I am also profoundly concerned about the wider impact of this massive planned expansion of Tesco Express – a real emerging monopoly. Where I live the opening of a Tesco Express led directly to the closure of two corner shops. We are losing all diversity in food retailing and ultimately it will be the consumer and communities that lose out. What is good for Tesco is not always good for the rest of us – far from it.

“I appreciated that planning rules mean the council had no choice but to approve this unwelcome planning application – but that means the government must change the rules. It’s time to stand up for the smaller businesses that contribute so much to society beyond simple retailing.”

The Sunday Times yesterday reported,
“Tesco hopes to double the size of its convenience store empire — in a move sure to strike fear into the hearts of independent corner shop owners across Britain.
“The nation’s biggest retailer told City analysts in a private briefing it would step up the expansion of its Tesco Express format. It has about 1,000 small stores and believes there is the potential for 2,000.”
Commenting, Peter said,

“In April last year the Competition Commission reported after a lengthy investigation. It made a string of recommendations, which Tesco is vigorously contesting. It’s time to implement them all – and especially the local competition test and the creation of a Grocery Ombudsman - before more small shops and suppliers are forced to the wall.”

ENDS

The official summary of the Competition Commission’s April 2008 report follows:

1 On 9 May 2006, the Office of Fair Trading (OFT) referred the supply of groceries by retailers in the UK to the Competition Commission (CC) for investigation under section 131 of the Enterprise Act 2002 (the Act). We published our Emerging Thinking, accompanied by eight working papers in January 2007. A further 18 working papers were published in the lead-up to the publication of provisional findings in October 2007, and we published our provisional decision on remedies in February 2008. This document, together with its appendices, constitutes our final report.
2 We found that, in many important respects, competition in the UK groceries industry is effective and delivers good outcomes for consumers, but not all is well. We have concerns in two principal areas. First, we found that several grocery retailers have strong positions in a number of local markets. Barriers faced by competing grocery retailers that could otherwise enter these markets mean that consumers get a poorer retail offer in terms of prices, quality and service than would otherwise be the case, while those grocery retailers with strong local market positions earn additional profits due to weak competition in those markets.
3 Second, we found that the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers.
4 We are taking a number of steps to address the problems that we identified. We are recommending to Government and the devolved administrations that a competition test be applied, as part of the planning process, to proposed new stores (and proposed extensions to existing stores). The competition test will favour new entrants and grocery retailers other than those which already have a significant local market share. We will also require grocery retailers to relinquish control over landsites in highly-concentrated markets that we have identified as inhibiting entry by competing retailers. Further, we will be limiting the ability of grocery retailers to prevent land being used by their competitors in the future.
5 We will be tightening the provisions of the Supermarkets Code of Practice and broadening its application such that more grocery retailers will be required to abide by its terms. We will also be seeking legally binding commitments from grocery retailers to establish an Ombudsman to oversee the revised Code. If we cannot secure suitable undertakings from these grocery retailers, we recommend that Government takes the necessary steps to facilitate the establishment of the Ombudsman.
6 The competitive position of convenience stores relative to large grocery retailers was a key concern for many in our investigation. We received a considerable body of evidence from the Association of Convenience Stores (ACS) and others showing that the competitive pressure on convenience store operators is intense. It is clear that the process of competition can be challenging, and in some cases, even leads to the closure of businesses. But, however sympathetic we may be to the effects of such pressure, we must, as a competition authority, assess the effects of the process of competition on the interests of consumers. Having examined thoroughly the full range of concerns that have been raised with us regarding possible distortions in competition between large grocery retailers and convenience store operators, we did not find that these concerns were substantiated.
7 We assessed whether there are structural aspects of the market or industry practices that may facilitate collusion or coordination between grocery retailers. In light of the OFT’s recent actions in relation to collusive behaviour involving grocery retailers, we note that consolidation among suppliers to grocery retailers and practices such as category management could facilitate the exchange of information between grocery retailers through their suppliers. We did not uncover compelling evidence of effective tacit coordination over a wide range of products. This does not, of course, rule out the existence of attempts at collusion, which the OFT has responsibility for investigating.
8 Many parties raised the strong market position of Tesco as a matter of concern. We did not find there to be competition concerns that apply to Tesco over and above those that apply to other grocery retailers. There would obviously be cause for concern if any one retailer were able to achieve and exploit significant market power to the detriment of consumers. Our assessment is that the basis of Tesco’s position is not insurmountable; there is nothing that Tesco does that could not, over time, be challenged by competitors. There is a risk that at some point in the future the number of Tesco stores that do not face strong competition increases and there would be further deterioration of the retail offer that would harm consumers. Such a development could also take place with any other large retailer. We expect our remedies to contribute to preventing such a situation occurring.
9 A range of issues outside the competition arena were put to us during this investigation. These include the impact of grocery retailing on the nation’s health, the social impact of low-priced alcohol sales, the importance of high streets and rural shops to social cohesion, the future of UK farming and self-sufficiency in food, working conditions at grocery suppliers in the developing world, and the environmental impact of grocery retailing. These concerns provide important context and background to the investigation but they are not, in themselves, competition issues. We are restricted by statute from making findings in relation to non-competition matters. Many of the broader issues that were raised with us are already under active consideration and review by those government departments and agencies with policy and operational responsibilities in these areas.
10 In conducting this investigation we received more than 100 submissions from grocery retailers, and more than 600 submissions from suppliers, consumers, local authorities and others. We held approximately 80 hearings in England, Scotland, Wales and Northern Ireland with grocery retailers and others, conducted numerous site visits and held round-table discussions with food and drink manufacturers, primary producers and academics to discuss issues arising in the investigation. We supplemented the evidence collected through submissions and hearings with data from questionnaires, surveys commissioned by the CC and industry publications. Much of this evidence is published on our website. Where necessary, we used our legal powers to ensure that the information required for our investigation was provided to us.


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