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Research and Markets: The UK's Competition Commission Fears That the Retailer Tesco Could Achieve a 45% Market-Share By Building Outlets on the Land It Owns, Read More Inside the UK Food and Drink Report Q1 2007

Posted on: Friday, 27 April 2007, 12:00 CDT

Research and Markets (http://www.researchandmarkets.com/reports/c55392) has announced the addition of UK Food and Drink Report Q1 2007 to their offering.

The UK Food & Drink Report provides independent forecasts and competitive intelligence on the UK's food & drink industry.

In January 2007, the UK Competition Commission published the long awaited Emerging Thinking report on its enquiry into the country's mass grocery retailer (MGR) sector, which sets out the Commissions emerging thinking on competition in the supply of groceries by retailers in the UK, and identifies areas where it will be seeking additional evidence prior to the publication of provisional findings, which is not expected before October. The three areas that have been considered to be most important to are the behaviour of grocery retailers towards their suppliers, the conduct of grocery retailers and consumers, as well as the structure of any local market for groceries, and land and planning issues.

Where the first issue is concerned, the Competition Commission has to date found no systemic problem with the economic viability of food and drink manufacturers and processors, with little sign of any ongoing decline in profits for these suppliers as a group. The same applies to grocery wholesalers. Also, the Commission has found no evidence for the claim that larger grocery retailers systematically obtain lower prices from their suppliers than smaller grocery retailers or wholesalers; it has, however, found that larger grocery retailers receive a better quality of service. Where the conduct of grocery retailers is concerned, the Commission has identified ten operators that engage in below-cost selling which has, however, been found to be small in extent in the context of total revenues. According to the findings, the practice is mostly confined to a small number of product groups, including dry groceries and alcohol. The Commission, in its interim findings, did not come to any definitive conclusions on the issue and has called for more evidence from interested parties before the publications of its final findings. Further investigations on whether large MGRs force smaller operators out of the market will be carried out, with a key focus on local factors.

The main focus where land and planning issues are concerned has been Tesco's pre-eminent position in terms of the holding of land for retail development and claims that the retailer could achieve a 45% market-share by building outlets on the land it owns. The Commission has rejected this view but will carry out further investigations into the ways in which land holdings might be used to impede competitors market entry. Overall, the Commission has recognised concerns that Tesco or any other MGR could get into such a strong position, either nationally or locally, that no other retailer could compete effectively, but has also pointed out that in a competitive market, commercial success should not be penalised unless there is clear evidence about an abuse of market power and harm to consumers.

Analysts have mostly described the Competition Commissions findings to date as good news for the MGR sector, while critics have described the Commissions approach as too soft, with regulators failing to grasp the full impact of the market leaders growing dominance. The publication of the Commissions provisional findings, expected in October 2007 at the earliest, will shed further light on the state of the UK's MGR sector, and any potential measures considered necessary to ensure fair competition.

For more information visit http://www.researchandmarkets.com/reports/c55392.

Source: Business Wire

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