The Forum of Private Business (FPB) is insisting that the Competition Commission's new ‘competition test', which is designed to prevent supermarket chains from monopolising town centres, protects the interests of smaller shops as well as large superstores.

The Commission's proposals, following its 21-month inquiry into the lack of competition in the £123 billion retail sector, include clamping down on ‘restrictive covenants', in which the likes of Asda, Morrison's, Sainsbury's and Tesco dictate who can build on the land they sell.

In addition, regional planning authorities will be required to determine whether a particular chain is dominant before deciding on an application for a new store.

Wrong diagnosis 

The FPB said it believes that this could simply open the door for other large retailers to step in, and do little to help smaller shops.

"Finally, after such a long probe, we have arrived at the stage where remedies are being proposed," said the FPB's Phil McCabe.

He explained that the problem, as far as many of the FPB's members were concerned, was that the Commission got its diagnosis of the retail sector's problems all wrong in its preliminary findings, which were published in October.

McCabe warned that other chains might find it difficult to get a foothold in an area dominated by a rival, but that the bigger issue was that small retailers are struggling to survive.

The FPB accused the Commission of severely letting down many small retailers, and also suppliers.

It said that the latter were given no guarantee of anonymity if they spoke out against the supermarkets' business practices, leaving them reluctant to give evidence out of fears their businesses would suffer as a result.

Although it was concerned that supermarkets could pass on unexpected costs to their smaller suppliers, the FPB claimed that the Commission focused instead on improving competition between the supermarket giants.

“It even recommended increasing the variety of new stores being built,” McCabe added.

Independent regulator 

The FPB said it was concerned that this could lead to the proliferation of large, often out-of-town, shopping centres, which draw trade away from independent shops and devastate high streets.

Another of the Competition Commission's ‘remedies' was to appoint an independent regulator to oversee the relationship between supermarkets, suppliers and producers, working with new supermarket-appointed ‘compliance officers' in order to enforce a revamped Supermarket Code of Practice (SCOP).

The Ombudsman would also be able to award compensation should any of them fail to stick to the rules.

The FPB said, however, that will come as little consolation to the many farmers and small dairies, for example, who felt that the £116 million in total fines imposed in 2007 by the Office of Fair Trading (OFT), following its investigation into the supermarkets' dairy market price fixing scandal, were a drop in the ocean compared to their vast profits.

"We have all experienced problems because of the supermarkets, especially since they started moving into areas they never have before," said FPB member Arthur Hardy, of Special Thoughts card and gift shop in Llangollen, Wales.

"We have every right to complain when they overstep the mark. The Competition Commission is just nodding in our direction, and giving the big supermarkets what they want. It's worrying to see what's going on,” he concluded.

More radical action needed 

The Federation of Small Businesses (FSB) also criticised the Competition Commission’s proposed remedies in its inquiry into the grocery market.

The UK’s biggest business organisation repeated its view that the remit for the inquiry is far too narrow and that consumers have been let down by the competition authorities.

The FSB called for an independent regulator with a wide-ranging retail brief to ensure fair competition in all parts of the sector and reverse the trend of over 2,000 independent shops going out of business each year.

The FSB is not alone in thinking that more radical action is needed: over 400 MEPs have adopted a declaration calling for an investigation of and remedies to “the abuse of power by supermarkets operating in the European Union.

Clive Davenport, FSB Trade & Industry Chairman, said that the Competition Commission had consistently failed to be an effective regulator to the retail industry.

“Three time-consuming, costly and ultimately meaningless inquiries in just seven years tell their own story,” he added.

Growing consensus 

The FSB said that the idea for an ombudsman to oversee the relationship between supermarkets and suppliers was a reasonable one, but did not go far enough.

“There are many more issues, such as below-cost selling and free parking for out-of-town shopping centres that the Competition Commission has failed to address properly,” according to Davenport

He said that there was a growing consensus of opinion across Europe that something must be done to protect independent retailers from the damaging effects of the unchecked expansion of supermarkets.

“In the UK it’s time for the Competition Commission and the Office of Fair Trading to put out of their misery and for an independent regulator with real power and a wide-ranging retail brief to be set up,” Davenport concluded.

The deadline for comments on the Competition Commission's recommendations is 1 March. The final report is published in April.

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