Tesco recorded a landmark victory over the Competition Commission this week, winning its appeal over the proposed competition test in the planning system. Does this throw the other recommendations from the Commission into doubt?
Many commentators have revelled in the fact that Tesco is suffering its first serious blip in its history as it struggles to keep its customers in the tough times while competitors seemingly go from strength to strength. But Tesco had the last laugh this week when it scored a landmark victory over the Competition Commission.
While it’s too early for Tesco executives to jump for joy, they must have at least broken a wry smile at the news. Tesco challenged the fairness of the competition test, which would have meant local planners took into account the variety of grocery shops in an area before giving the green light. Tesco – with a UK market share of over 30 per cent – would have been most affected by the test, severely hampering its expansion plans.
Rival grocers and smaller shops are undoubtedly disappointed. Asda pointed out that the test is designed to open up local markets and drive up competition, which would result in lower prices – something that customers are now more than ever in search of.
Tesco on the other hand claimed the test would increases costs and make the process slower and more bureaucratic. And, making a valid point, the grocer said it would be “particularly perverse” to introduce a test that would block investment in the present economic climate.
Whichever argument you agree with, the ruling throws into doubt the credibility of the Competition Commission.
After a gruelling two-year long investigation, the Commission found that the UK grocery sector is broadly competitive and delivers a good deal for customers. However, it still felt the need to make three recommendations at the conclusion of its inquiry – the competition test, an ombudsman to police the supermarkets’ treatment of suppliers and a new code of practice outlining how stores should best deal with their suppliers.
So far, none of these recommendations have been enforced. With Tesco’s victory, the competition test’s future looks uncertain. The Commission said it may try to revive the test in a revised form and in its statement said “certain considerations about how the test would work, and its costs and benefits, should have been explored further”. But having been thwarted at the first hurdle is there any point exploring the test further?
Moreover, supermarkets also object to both the new code of practice and to the creation of the ombudsman.
The grocers believe that these recommendations will increase prices and mean that grocers will have to bow down to the demands of suppliers.
With the UK in the throes of recession, the Government would be foolish to implement anything that leads to price increases. Which leaves the Commission looking like it’s got egg on its face.