ECONOMICS: by Patrick J. ByrneNews Weekly
UK report calls for halt to supermarket takeovers
, March 4, 2006
A British parliamentary committee is championing small retailers against the big supermarket chains, writes Pat Byrne.A British parliamentary committee has recommended banning further supermarket takeovers, warning that, after wiping out small shop competitors, supermarkets will soon exploit their dominant market power by raising prices.
The committee's recent report warned: "Prices of products will remain fairly low until consolidation reaches a saturation point and the attention of the multiples turns to increasing value to shareholders by growth through margin. Prices are then likely to increase with fewer competitors in the market."
The report, High Street Britain: 2015
, is the product of the Parliamentary Small Shops Group, an influential cross-party committee.
According to The Guardian
newspaper, the report painted a grim picture of Britain's retail sector - its "high street" - over the next decade, warning that consumers will be the big losers if the supermarkets are allowed to continue expanding unchecked.
The parliamentary report identified newsagents, convenience stores, specialist retailers and off-licences to be most vulnerable to the onslaught of the super stores of Tesco, Asda, Sainsbury and Wm Morrison. The parliamentary committee called on the UK Government to appoint a retail "tsar" to oversee the industry and to introduce an immediate moratorium on any further super-store takeovers and mergers.
It recommended that the moratorium should last at least until the Government is able to secure the "diversity and vitality" of the retail sector.
At present, the supermarket industry is regulated by the UK Office of Fair Trading (OFT) and the Competition Commission, which rule on mergers and competition issues.
The report's recommendations come as the OFT is about to decide on whether to refer the food retail industry to the Competition Commission for a full-scale investigation.
There are some 278,630 small retail outlets in the UK. According to a financial research group, the New Economics Foundation, specialist food retailers such as butchers and bakers closed at a rate of 50 per week from 1997 to 2002 as more supermarkets came into being. The four major supermarket players control nearly 75 per cent of the £120 billion grocery market in the UK. (The major supermarket chains in Australia also control about 75 per cent of the grocery market).Restriction of choice
The report said that the consumers would be the biggest losers in the rise of supermarkets because of the restriction in the choice of brands, available products and shopping locations, and because of the eventual price rises.
While the major supermarkets have argued that it is the consumer who has ultimate power over price and choice of product in the retail sector, the report disputed this argument. It said: "Strong concerns have been raised over whether consumers genuinely are the ultimate power in the retail sector.
"Accessibility limits all consumers in terms of shops they can use. Immobile customers and those on low incomes are the most restricted in terms of choice."
The most vulnerable groups - the elderly, the less affluent and others without transport - will be hardest hit. Women, who make up the majority of small shop workers, will also suffer as their jobs disappear.
The dominance of the supermarkets will have knock-on effects on local communities, particularly in rural areas. Between 1991 and 1997, rural areas lost 4,000 food shops. Local shops have tried to fight back by transforming themselves into convenience stores to compete with the superstores. But now, the big supermarkets are expanding their convenience outlets to again take on the local stores.
The committee report gave examples of local "monopolies" such as in Inverness, Scotland, where Tesco has 51 per cent of market share, and in Twickenham, south-west of London, where it has 47 per cent.
"In such areas," it said, "voting with their purse is not a viable option, due to the lack of alternative offers."
It added: "Wafer-thin margins, combined with the constant threat of unfair competition from the supermarket behemoths, mean that small shops, once an essential part of the fabric of rural and urban life, are disappearing in their thousands each year ...
"The erosion of small shops is viewed as the erosion of the social glue that binds communities together."
The report made a number of urgent recommendations:
- An immediate moratorium on further mergers and takeovers in the retail sector;
- The creation of a retail regulator to oversee the industry;
- Introduction of comprehensive codes of practice to be applied across the retail sector;
- Giving local people greater say in the planning and siting of new supermarkets;
- Developing regeneration units in all local authorities to encourage the re-building of smaller shops.
Liberal Democrat MP Greg Mulholland told The Guardian
: "It's time to restore some balance into British retailing. We have done our job and the Government cannot ignore this any longer."