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Competition Commission clears below-cost selling

Below-cost selling by grocers has been cleared by the Competition Commission. Provisional findings by the commission explained that this practice "is not having significant unintended effects on smaller stores." This finding forms part of a broader enquiry by the commission into the groceries market in the UK.

The report also concluded that "below-cost selling by national retailers is not part of a predatory strategy aimed at convenience stores or specialist stores". Grocers have, however, been criticised by the on-trade, and the pub trade in particular, for these strategies.

Clive Davenport, trade and industry chairman for the Federation of Small Businesses, which has been active throughout the enquiry, commented: "The Competition Commission’s report seems to recognise problems such as below-cost selling and the shoddy treatment of suppliers, but claims that small independent retailers are not affected. This is absurd."

The commission’s provisional findings acknowledged that the economies of scale and purchasing cost advantages of the multiple grocers "are likely to act as a barrier to entry or expansion by smaller retailers and new entrants. However, the presence of the grocery wholesaling sector mitigates the detrimental effects of this barrier on smaller retailers and new entrants."

Senior management at Tesco, a major subject of the enquiry, were confident about the outcome of the inquiry. Earlier this month, chief executive Sir Terry Leahy was quoted by The Independent, saying: "I don’t have any concerns about the competition inquiry. The real judge is the consumer." He added "Luckily, there are more customers than competition enquiries."

 Today’s findings by the commission concluded that "Tesco is not in such a strong position that other retailers cannot compete."

Clinton Cawood, 31.10.07

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