OFT to refer grocery market to Competition Commission
The Office of Fair Trading (OFT) has signalled its intention to refer the UK grocery market to the Competition Commission for more detailed investigation.

There will now be a four-week consultation period, ending on April 6.

Despite evidence that prices are falling - as well as increasing choice, quality and strong competition between supermarkets - the OFT said that there are 'features of the market which, when considered in the context of increased consolidation and the move by supermarkets into the convenience sector, could reasonably be suspected to distort competition and harm consumers.'

It points to the planning regime, in particular the needs test, which acts as a barrier to entry, making it difficult for new stores to open and compete with those already in the market, the OFT said.

The OFT also raised concerns over supermarket land banks and restrictive covenants in selling sites.

There is also some evidence that the big supermarkets' buyer power has increased and that there are aspects of pricing behaviour - below-cost selling and price flexing - which could distort competition, the OFT said.

'Although consumers have benefited from lower prices, the restrictions in the planning system and the possible incentives those restrictions create for retailers to distort competition may harm consumers and mean that competition in the market is less than it might otherwise be,' said OFT chief executive John Fingleton.

'In addition, the convenience sector has changed rapidly and, given our evidence and the importance of this market for consumers, our provisional view is that it would be appropriate for the Competition Commission to investigate how that has affected consumers in local markets in terms of product variety and choice of fascia,' he concluded.