The Association of Convenience Stores’ chief executive James Lowman has given a cautious welcome to the Competition Commission’s provisional findings and highlighted a number of areas that remain of concern.
“The Competition Commission’s findings show clearly that in a number of local markets consumers are disadvantaged by the lack of competition,” said Lowman. “We welcome this conclusion and we welcome the fact that the commission will now look to intervene to deliver greater fairness into the supply chain. This is a step forward, although we remain cautious about a number of aspects of the report.
“We have argued from the outset that buyer power exists and that it is most apparent in the way in which dominant players with buyer power can abuse their relationships with suppliers. Where this occurs the knock on effect is a reduction in opportunities for retail competitors and ultimately a lack of choice for consumers.
“We are strongly of the view that the Supermarket Code of Practice is not working. It is too weak in its wording and it is not proactively enforced. The CC must look at this; however this alone would not address the effects of buyer power and we need to take steps towards greater transparency in the terms between retailers and suppliers.”
And Lowman also had strong views on the report’s findings in regard to the planning system. “We agree with the Commission that the planning system works in favour of the existing national level grocery retailers and that this stops small retailers investing or expanding. However, we believe that this dominance comes because of the resources and tactics of the biggest developers rather than because of the system itself.
“We are heartened that the Commission’s findings have dispelled the myth that supermarkets are being stopped from building new stores by the planning system. We know that since 2001 new supermarkets have been built at a rate of two a week. The big concern is that none of these have been built by a retailer other than an existing grocery chain.”
But the ACS has called into question some of the date gathered by the investigators. “It is worrying that the Commission still does not have a clear view of trends in convenience store numbers. They use three different and inconsistent data sets. Given that they make a number of conclusions related to the health of the market on the basis of this data we find it highly unsatisfactory that they allow this confusion to remain. This confusion of data obscures the fact that there is a trend of overall decline in convenience store numbers.
“We are also concerned that the Commission has used a significantly smaller sample of suppliers and products than the previous inquiry in 2000 and it is not clear why. This smaller sample raises questions about how confident they can be that the distortions created by buyer power are not more extensive. Nevertheless they have found that buying price differentials have widened to 13 per cent.”
And Lowman also highlighted below-cost selling. “We are concerned that the Commission has made a u-turn in its interpretation of the negative effects of below cost selling,” he said. “It is clear that the practice continues as was the case identified by the 2000 Inquiry. However, this time the Commission dismissed the negative impact on consumers and we are very concerned to understand why.”
Lowman said his organisation will now consult with its members and respond in detail to the report and its suggested remedies.
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