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Supermarkets: A Free Market Success

May 27, 2008

Supermarkets: A Free Market Success

Supermarkets are one of this country’s success stories. The Competition Commission has recently completed its third full-scale inquiry into supermarkets in the last eight years and given them a thumbs-up on most issues. The Commission’s most recent investigation sought to establish whether consumers are receiving the benefits of vigorous competition. After about 550 submissions, 65 hearings and the receipt of data from 14,000 grocery stores, the commission released its recommendations back in February. Its conclusions indicate an overall “not proven”—indeed, one would argue, “not guilty”—verdict for supermarkets on the charges of pushing competitors out of the market, bullying suppliers and limiting choice.

By not speaking strongly against the supermarkets the report was consigned to the back burner of importance. Recently I had the opportunity in parliament to raise the recommendations of the Commission’s report and raise some of the genuine concerns that I am sure many people have about the fast-changing patterns of high street shopping in recent years. Click here to read the full debate.

I am neither interested in burying nor unduly praising supermarkets but I believe that we should never forget that the well-stocked shelves of a supermarket represent the most visible signal of the success of free markets, choice and capitalism. Yet there are many detractors, most of whom seem to have an irrational and often downright hypocritical hatred of the success of big retailers.

I believe that the consumer has had a pretty good deal out of supermarkets over the last 10 years and after a long time of relatively inexpensive food we now have widespread increases in the prices of basic foodstuffs. But supermarket competition is providing a shop-around mentality to the benefit of all UK consumers.

Whatever analysis is made into supermarket competition there is one inescapable fact which cannot be ignored – supermarkets are primarily successful not because of unfair or immoral practice but because consumers regard themselves as well served by them.

The Commission’s report looked with concern at land banking, supplier relationships and competition with small businesses. Such issues are very important and it is right that they are properly addressed. I believe the Government should examine the tax system, employment laws and town planning to give smaller businesses a helping hand. I suggest that reforming business rates to allow more small enterprises to set up shop and remain active would be a far better route to intensifying competition and diversifying the high street than heavy-handed restrictions on the bigger players. Smaller employers could perhaps be released from some of the bureaucratic shackles of the employment market if we made way for deregulation. If the Government provided an incentive, local councils could do their bit—I appreciate that they must do their bit—by keeping down the cost to the shopper of town centre parking, in contrast with free out-of-town supermarkets, and regenerating town centres.

However, despite those who believe that all problems require greater regulation and interference, the grocery issue will always boil down ultimately to consumer choice. Shoppers will vote with their feet and spend their money at the stores that cater for their needs. And that is the way it should be.

Mark Field

May 2008