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Supermarket Regulator

The hon. Gentleman is right of course. A little later I shall discuss the position of suppliers and how supermarkets, due to their power, have been able to exert unnecessary pressure on them. The ACS response, due this week, is expected to present a number of conclusions and suggestions for remedies for the imbalance in the market. They include easier confidential complaint mechanisms for businesses; a ban on price flexing; transparency of buying prices; a market share cap; implementation of local competition policies; and initiating an independent proactive retail ombudsman to investigate supermarket dealings with suppliers. Under UK law, the function of the competition appeals tribunal—CAT—is to hear and decide appeals and other applications or claims involving competition or economic regulatory issues. The CAT is a specialist judicial body, with cross-disciplinary expertise in law, economics, business and accountancy. It is currently investigating the Association of Convenience Stores v. Office of Fair Trading, case number 1052/6/1/05. At a case management conference on 1 November 2005, and in the light of the OFT’s indication that it wanted to withdraw its decision of 3 August, the OFT decision was formally quashed by the tribunal and referred back to the OFT, with a direction to reconsider the matter and make a new decision. I turn to the issue of Tesco, which is by far the largest player in the market. Tesco controls more than 30 per cent. of the overall British grocery market, worth £80 billion. One in every eight pounds spent in retail is spent in Tesco. By 2010, the firm’s share of the grocery market is predicted to be 45 per cent. Tesco has the largest market share in 67 of the 120 postal districts in the country, while Asda controls 23, Sainsbury’s 14 and Morrisons 13. In 14 districts, Tesco has more 40 per cent. of the market. In five towns, it has more than 45 per cent. of the market. That is a rather substantial domination, and we have not seen the end of it. It would be wise to examine Tesco’s expansion plans in yet more detail, as Tesco has accumulated enough land to develop up to 180 new stores and it plans to expand abroad. Tesco will open 150 stores abroad in the second half of this year. Its overseas operation, from Japan to the Czech Republic, now accounts for 20 per cent. of its turnover. Of course it is important to note Tesco’s contribution to the development of popular retailing in the United Kingdom in the past decade. Sir Terry Leahy, the chief executive of Tesco—a world-class entrepreneur—has led the retailer’s extraordinary success. Sir Terry’s management method and clarity of thought has created a modern-day company that leads the UK market and ranks No. 3 in the world. Shopping at Tesco—I declare an interest in that I shop at Tesco—and other supermarkets is a wonderful experience. We all love the convenience of having a wide selection of choice under one roof, but there is a line to be drawn between innovation and dominance and between competition and monopoly. Sir Terry’s visit to Bangalore in a bid to launch Tesco into the Indian market is worth noting. I admire his enterprise in seeking to sell basmati rice to the Indian population. I suppose that that is the retail equivalent of selling sand to Saudi Arabia. It has been suggested that Tesco’s expansion abroad is a masterstroke to draw attention from the controversy of the domestic market, so that it can continue to expand. The corporate affairs director of Tesco, Lucy Neville-Rolfe, told MPs last month that her company had grown"““because we have helped really transform the lives of ordinary people. We have helped to bring prices down; we have helped to improve quality and range; it is great service.””" Not everyone agrees that that is for the good. Many manufacturers and distributors have told me that it is complicated and very costly to sell their products on the shelves at Tesco. Rather hefty charges are levied to sell any product that is not its own brand. Other distributors are left with no choice but to pay those fees if they want to sell their products. Some have argued that the payment of up-front fees amounts to corporate backhanders. If the distributors do not pay for their goods to be sold, they are not sold. If Tesco does not buy them, the distributors are out of business. Having taken on the goods and paid the listing fee and the commissions that Tesco and others demand, the suppliers then have to pay Tesco to promote their own goods. Given the lack of transparency, it is very difficult to issue formal complaints and suppliers are left absolutely powerless.