No end for supermarket discounts

By James Wilmore

- Last updated on GMT

Related tags: Supermarket

Hopes for action on supermarket discount deals were dealt a huge blow last week after the issue was thrown out by the Competition Commission.The...

Hopes for action on supermarket discount deals were dealt a huge blow last week after the issue was thrown out by the Competition Commission.

The watchdog's provisional report into the grocery market, part of a 17-month inquiry, said: "Below-cost selling by national retailers is not part of a predatory strategy… and is not having significant unintended effects."

The inquiry has been looking into whether the working practices of the big four supermarkets restrict competition. Referring to "predatory" pricing strategies - where retailers deliberately undercut other local firms to put them out of business - Peter Freeman, the commission's chairman, said: "We have looked very hard to see if that is going on and the evidence is not there."

He added: "We are competent to judge competition issues, but not social issues like alcohol. It's not us, sorry."

However, the report documented below-cost selling of alcohol during last year's World Cup, revealing that total discounted sales by Tesco, Sainsbury's, Morrisons, Asda and Somerfield were a staggering £38.6m.

Licensees reacted with dismay to the overall findings.

Tony Brookes, managing director of pub group the Head Of Steam, and leader of the 'Stuff the Supermarkets' campaign, said he was very disappointed. "It more or less gives the supermarkets a clean bill of health, which will take even more trade away from pubs," he said.

Shaun Morris, licensee at the Peter De Wint in Lincoln, said: "Loss-leading deals are a concern, because we're right next to a Sainsbury's. Pubs aren't allowed to do cheap drinks promotions, so why should supermarkets?"

MP John Grogan, who has previously spoken out about the issue, welcomed the fact that it was now on the record that supermarkets sold alcohol below-cost.

"The political pressure for the government to act is growing," he added.

The Federation of Small Businesses (FSB) also hit out at the findings. Clive Davenport, the FSB's trade and industry chairman, said: "The 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 report also recommended a change in planning laws to allow more supermarkets to be built in areas where there is not enough

competition. Davenport added: "The suggestion that, to increase competition, the planning system should be relaxed to allow more supermarkets to be built is perverse."

The report's general conclusion was that consumers were getting a "good deal", but action was needed to improve competition and address the relationship between retailers and suppliers. The final version of the report is due next May.

Inquiry background

A strong sense of deja-vu hangs over this investigation. This is the Competition Commission's fourth inquiry into grocery retailing in eight years.

This latest probe was initiated in May 2006 when the Office of Fair Trading referred "the supply of groceries by retailers in the UK" to the Competition Commission for investigation under section 131 of the Enterprise Act 2002.

Supermarkets selling alcohol as a loss-leader has long been a concern for pubs and the most recent findings will be a setback for those eager for a clampdown.

All eyes will now be on the results of a Department of Health investigation into the impact of cheap supermarket alcohol deals, which is expected to be completed in 2008.

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