Crackdown on Supermarkets

By Matt Chorley London Editor

The power of supermarkets to exploit farmers is to be curbed – but there are fears that new rules on competition will do little to save small shops.

The Competition Commission’s report into the pounds95 billion grocery industry vowed to improve competition in local areas by opening up the market between rival stores. But campaigners last night warned that increasing the number of large-chain supermarkets would just further squeeze out independent shops.

In a wide-ranging report after a two-year inquiry, the commission called for a powerful ombudsman to investigate the relationship between large retailers and food producers to ensure farmers are not ripped off.

The National Farmers’ Union said a strengthened code of practice backed by a proactive ombudsman was "exactly what is required to help develop a framework of improved transparency and fairness in the food supply chain".

NFU president Peter Kendall added: "It is in everyone’s interests that the food supply chain is transparent and profitable, so that farmers and growers are able to supply the quality and choice that consumers expect and deserve."

Most fresh produce on sale in supermarkets is not sold to them directly by farmers but through intermediaries such as packers, processors and fresh food wholesalers. In 2006, just pounds295 million of produce was bought directly by Asda, Marks & Spencer, Morrisons, Sainsbury’s, Somerfield and Tesco combined, out of pounds14.3 billion in total agricultural production.

The Farmers’ Link organisation gave evidence, warning that detailed demands from big stores about the way food should look resulted in "waste and increased pesticide use", which in turn had adverse environmental impacts.

The commission was repeatedly warned about the importance of high streets and rural shops to social cohesion and the future of UK farming and self-sufficiency in food.

St Ives MP Andrew George has been a campaigner on the grocery market for many years and submitted evidence to the inquiry.

He said he welcomed the recommendations on strengthening the position of producers – but feared they could come a decade too late.

He backed the plan to give the new ombudsman the power and resources to proactively investigate the relationship between retailers and suppliers, because few farmers would come forward to make a formal complaint for fear of losing a contract.

More contentious in yesterday’s report was the planning shake- up unveiled by the commission in a bid to boost grocery market competition.

According to the commission, 71 per cent of people in rural areas have access to at least one big supermarket within a 15-minute drive. But just 13 per cent have a choice of at least four different big-name stores in the same distance. The report also highlighted "substantial regional variations" in the figures.

There will be a new "competition test" in planning decisions on larger stores as well as action to prevent land agreements restricting competitors from entering the market.

Tim Jones, chairman of the Devon and Cornwall Business Council, said: "It is obviously unhelpful to effectively have a block on development by competitive supermarkets.

"As far as the economy of Devon and Cornwall is concerned, particularly with rising food prices, it is essential to have as much competition as possible. Every time we see more competition in supermarkets, there is also a greater chance of having a debate about local food procurement."

The new test would only allow a supermarket development to go ahead if it was the first branch of the chain within a 10-minute drive, if there are already four or more other stores in the area or if the new shop will give the firm less than 60 per cent of the local market.

Other measures include involving the Office of Fair Trading (OFT) in all planning applications for new grocery stores bigger than 1,000 sq m. Big-name stores will also be banned from retrospectively changing their agreements with farmers or suppliers or shifting risks and costs on to them.

But the Association of Convenience Stores (ACS) criticised the report as a "failure". Chief executive James Lowman claimed too much focus had been put on competition between the "big four" supermarket chains – Tesco, Asda, Sainsbury’s and Morrisons.

"This approach ignores the critical need for a variety of retailers and supply chains," he said. "It is out of kilter with consumer trends towards more local shopping, and neglects the needs of many groups of consumers whose requirements are not properly met by the big four superstores."

And the Federation of Small Businesses (FSB) said: "We are in danger of sleepwalking into the death of our high streets."

Friends of the Earth claimed the "big four" supermarkets were the "bully boys of the retail sector, bleeding suppliers dry and reducing shoppers’ choice". The group said the commission had missed the opportunity to support local shops and choice.

Last night Competition Commission chairman Peter Freeman insisted independent retailers were "not in terminal decline".

"In many important respects, consumers are receiving the benefits of competition, such as value, choice, innovation and convenience, but we need to take appropriate action to address those areas where they could be served better and where their interests could be damaged in future."

Mark Prisk, the shadow consumer affairs minister and front-bench spokesman for Cornwall, called on ministers to commit to retaining the "needs test" on new developments, "to protect small shops and our city centres".

A spokesman for the Department for Communities and Local Government said: "We have made absolutely clear we are committed to protecting small shops and the vitality of town centres."

The Government will publish details of its new proposals in the summer.

(c) 2008 Western Morning News, The Plymouth (UK). Provided by ProQuest Information and Learning. All rights Reserved.