Small businesses hope CC's next move will ease supermarket stalemate

It has often said by those both in and outside the business and retail worlds that supermarkets are killing our high streets. All too many consumers find it all too convenient to just get everything in one go, for generally staggeringly discounted prices, rather than poke around 10 different small business outlets trying to rummage for a good deal in their local town centre. And that’s why, thankfully, we have an organisation such as the Competition Commission (CC) to even things out a bit – exactly as it’s trying to at the moment.

Following a two year investigation that ended last April, the CC suggested introducing an ombudsman with the power to reign in the ‘big four’ – Asda, Tesco, Sainsbury’s and Morrisons. Part of the measures the CC suggested  as part of proposed improvements to the market were hefty fines for the mistreatment of suppliers – the ruthless margin-squeezing more than a few small companies and farmers have been overheard despairing over. (President of the National Farmers Union Peter Kendall, for example, told the BBC yesterday: "There are a lot of underhand practices going on and we want someone to make them behave fairly.”)

But – some would say unsurprisingly – the supermarkets have just decided to reject the proposals. “Asda said it would be a ‘one-sided pressure group for price rises’ ”, the Guardian reported today, “while Tesco argued it would mainly benefit large successful suppliers. Sainsbury's wants the strengthened code to be implemented first before other powers are considered.” The paper added that the supermarkets feel the regulator is an unnecessary expense – costing all of an estimated £120,000 a year per organisation for the £110bn industry. Not cheap, we agree, but mere pennies compared to let’s say, ooh, Tesco’s record-breaking annual profit of £3.13bn this year.

As a result, CC chairman Peter Freeman is taking the matter to the Department for Business, Innovation and Skills. The hope is that the government will now bring in stricter regulations, enabling an ombudsman to fine unruly supermarkets whose bad practice is crushing small firms to their bitter ends. In a letter to the Department, Freeman wrote: "The ombudsman would be more effective if it had comprehensive powers to investigate and penalise retailers for non-compliance. The commission recommends the department consider providing the ombudsman with powers additional to those in the draft undertakings."

We hope the Department acts quick – with a desolate 12% of high street retail premises now vacant due to the collapse of so many small businesses, there’s no time to play around.

  • If you're a supplier to a large chain, read more about how to protect your margins in our feature Resisting the Squeeze.
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