The City Editor

By THIS IS MONEY
Updated:

 

As part of its long-running inquiry into supermarket prices, the Competition Commission arranged a couple of public hearings. The first, in Northern Ireland, attracted a respectable crowd. The second, in Birmingham, was graced by only two members of the public. It was one of the many embarrassments suffered by the Commission in its attempts to justify the Government's conviction that British consumers get a raw deal from the supermarkets.

The 10-month investigation has taken place against a background of falling food prices, plummeting shares and disappointing profits.

The Commission would never say so publicly, but there are signs that it is as anxious to bring this inquiry to as swift a conclusion as the grocers. Last night, it sent a list of possible remedies to the five food retailers it will be interviewing next month. Such a move is unprecedented.

Only a fortnight ago, the Commission published its letter of issues, where it set out the main points covered by its investigation to date. The Commission came to no conclusions about whether supermarkets are behaving against the public interest but it found limited evidence of excess profitability and also said consumers were perfectly happy with the service they receive.

The letter also announced that hearings would be held with Asda, Morrison, Safeway, Sainsbury's and Tesco during March.

Competition authorities have never before delivered a list of remedies prior to interviewing those considered most responsible for alleged abuse. Some of today's suggestions may seem dramatic but the Commission stresses they are purely hypothetical. It has sent them early to give the supermarket chains an idea of its thinking and whether these thoughts are practical. In other words, it is keen to speed up the process.

The Government has been anxious to show it is the consumer's friend and seems to believe America can show us the way. In fact our supermarkets make less money net than that US champion Wal-Mart. The gross margin is lower in the US because the cost base is lower - land is cheaper, taxes are less punishing and the stores are less attractive. The first two problems cannot be rectified by the supermarkets and the British seem willing to pay more for pleasanter shops.

The Commission has done its best. After all, Tesco took five cabloads of documents to its headquarters to satisfy the investigators' requests for information. But too much time and money has already been spent on this inquiry. If the Government really wants to cut prices to US levels, it will need to make some changes of its own.

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