It might seem odd to ask if we really want our businesses to be big and successful. After all, thriving businesses create wealth for the nation and are at the heart of a capitalist society.
But, actually, we don’t like it to go too far. As a company becomes very large, its image changes – often by degrees – from that of a great success story to the more sinister one of a dominating force, squashing the small guy and taking advantage of our lack of alternatives. Tesco, our most successful retailer, has been moving into this space in recent times.
Competition law looks at a number of dimensions but, as a general rule, if your market share goes much over 30 per cent, you are liable to be regarded as a potential monopoly.
Usually, this comes up in take-overs and mergers, where a larger entity is being created. If the new entity is too large for comfort, then the merger is stopped.
But what happens when a business gets very big by natural means – ie, by opening stores and building sales? Do the same rules apply? In principle, they should. If a business with a market share of 35 per cent created through a merger is a bad thing, a business with a share of 35 per cent created by opening stores is too, surely?
There is support for this view, especially where a company’s share in particular locations rises to very high levels. A good example is newspaper distribution, where three operators account for the whole market and each runs a near monopoly in their respective territory. This is probably, in fact, the only practical way to organise this industry.
The competition powers have tended to deal with this kind of scenario by launching repeated inquiries into one aspect or another of the situation – every couple of years in the case of news – and make rulings on particular issues. Now there are signs that grocery may be subject to the same treatment, provoked mainly by concerns about Tesco.
I think it’s important to have effective competition law and enforce it with rigour and severe penalties for abuse. However, I am concerned that some of what is being said and done at the moment is giving the impression that there is a glass ceiling on success here; that if you do too well, it’s seen as sinister and people (including the State) will gang up on you.
I’m not here to defend Tesco, but two things should be borne in mind. First, its share has grown mainly because shoppers have chosen to transfer their custom to it. Second, as far as I know, no material breach of competition law by Tesco has been revealed.
In these circumstances, I have sympathy with Asda’s plea for the regulator to lay off. A fixed period isn’t wise, but if there’s no evidence of any malpractice, there should be a high threshold for the OFT to wade back in again.
As for the rest of us, we should stop moaning about it and fight them on the beaches instead.
Bernard Dooling, creative director, 20/20