The UK’s Competition Commission has published an “emerging thinking document” based on the initial findings of a wide ranging enquiry into supermarket behaviour and practices. Despite perennial complaints from packaging suppliers that they are unfairly squeezed on price and, in some cases, forced to sign up to “unreasonable” contractual terms, the initial conclusions of the enquiry make little specific mention of how “fairly” the commission believes grocers are actually treating converters. Instead, they focus heavily on whether supermarket buying power is distorting competition, and whether supermarkets are unfairly exploiting their dominance by charging consumers in one region of the UK different prices to those in another.
Dick Searle, the new ceo of the UK Packaging Federation, says he is “not surprised” at the scant attention paid to converter concerns. He believes one reason is that many packaging suppliers to the multiples “are still too scared to bring to the commission’s attention evidence of unfair practices for fear of identification and loss of vital supermarket business”.
He stresses: “I know it is still attempting to gather evidence of packaging companies being unfairly dealt with. However, I appreciate the significant difficulties it faces, because although the federation and other trade bodies provide a channel by which converters can complain anonymously, so great is the fear of being singled out that very few have done so. My gut feeling is that many of the dubious practices converters complain about continue, but without hard evidence the commission is pretty powerless.
“Currently it’s a waiting game: I expect there to be significantly more on supermarket/packaging supplier relationships with the preliminary findings’ publication in June.”
Competition Commission spokesman Rory Taylor adds: “It’s probably fair to say the packaging sector has been somewhat less vociferous to date than some others, such as the farming industry, although it is hard for us to know whether a fear factor is responsible for this or not.”
The “emerging thinking document” and accompanying papers have been made public in advance of this summer’s anticipated publication of the fuller provisional findings of an enquiry into supermarket behaviour “referred” to the commission by the Office of Fair Trading last May. The enquiry, whose final results the commission hopes to publish by November, follows an earlier commission investigation into UK supermarket operating practices in 1999/2000. It concluded that that five grocery retailers – Tesco, Sainsbury’s Asda, Safeway and Somerfield – had sufficient buying power that 30 separate practices identified by the commission “had the effect of adversely affecting the competitiveness of some of their suppliers and distorting competition among grocery suppliers”.
Subsequently, the so-called “big four” – Sainsbury’s, Asda, Safeway and Tesco - undertook to comply with a new Supermarket Code of Practice, whose key goal was to stamp out unfair practices allegedly imposed on suppliers. In packaging these included insisting packaging suppliers pay towards the cost of brand owner/ retailer marketing campaigns, changing contractual terms unilaterally or without sufficient notice, not properly setting out contract terms, and the apparently widespread practice of third party rebates.
The latest enquiry, in which competition commission staff have visited stores and facilities throughout the UK, demonstrates the extent to which the big supermarkets now dominate the UK grocery scene. In 2006, the big four accounted for three-quarters of total grocery sales in supermarkets and convenience stores together, while an estimated 40 per cent of products sold in UK supermarkets are own label.
The commission stresses that to date it has “not yet reached any conclusions” on the issues discussed in the papers. It would still like to hear from “all interested parties”, who should either write to The Inquiry Secretary (Groceries Market Investigation), Competition Commission, Victoria House, Southampton Row, London WC1B 4AD - or email groceries@cc.gsi.gov.uk
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