Supermarkets: Competition Commission Report (Hansard, 19 December 2000)

§ Lord McIntosh of Haringey
My Lords, my right honourable friend the Secretary of State for Trade and Industry accepted the Competition Commission's recommendation that no action be taken against below-cost selling and price flexing.

Lord Bowness
My Lords, I thank the Minister for that Answer. But can he tell the House the point of investigations and findings against the public interest if no action is to be taken just because it is too difficult? Where does that leave the Government's policy of trying to ensure the survival of shops in the high street and of village shops if no action is to be taken on matters of this kind?

§ Lord McIntosh of Haringey
My Lords, the Competition Commission recommended that no action be taken on two counts. The first is not particularly because it is difficult, but because the results would not be effective and, indeed, may be counterproductive. Secondly, there is evidence from France and Ireland, which have restrictions on below-cost selling, that it leads to higher prices and higher margins. There is also evidence that supermarkets can drive down supplier prices to avoid such restrictions and that they use promotions, temporary offers and limited stock offers to get round them. The Competition Commission therefore concluded that such restrictions would not work. Regulating price flexing would ignore the fact that there can be genuine regional cost differences which would be outlawed by a prohibition. That would be to the disadvantage of consumers.

§ Lord Razzall
My Lords, will the Minister indicate whether the implication of what he has just said is that Her Majesty's Government have no policy whatever with regard to the current problems in relation to regional and local monopolies of supermarkets in certain areas of the country?

§ Lord McIntosh of Haringey
My Lords, that certainly does not follow from what I said. I was 626 describing our reaction to the Competition Commission report. A whole range of issues relate to the comparative advantage of supermarkets and high street shops. Such matters may include planning issues or issues relating to parking in the high street on a Saturday. The noble Lord, Lord Razzall, cannot draw the conclusion he did from what I said about the Competition Commission.

§ Viscount Waverley
My Lords, taking the noble Lord one step further, was thought given in the report as to the consequences of cavalier buying practices whereby suppliers are paid less than the cost of production? If not, what is the Government's view of such practices?

§ Lord McIntosh of Haringey
My Lords, I set out that argument in some detail in response to the supplementary question of the noble Lord, Lord Bowness. The danger, from the point of view of suppliers—I believe that that is 'what the noble Viscount is concerned about—is that a prohibition on below-cost selling would drive down supplier prices so that they would no longer be below-cost selling. That would be to the disadvantage of suppliers to supermarkets.

§ Baroness Miller of Hendon
My Lords, I declare an interest as a former member of the Monopolies and Mergers Commission, which was the predecessor of the Competition Commission, and as someone who continually goes across the Channel to buy in Calais where the prices of many articles are much cheaper than in our supermarkets. Perhaps I can change tack slightly. Can the Minister say whether the higher prices charged in British supermarkets have anything to do with fuel and vehicle taxes being higher here than in Europe? Also, will that make a difference to the smaller shops in this country and cause problems for them?

§ Lord McIntosh of Haringey
My Lords, I looked carefully into such evidence as is available on comparative costs in supermarkets in Britain and in continental Europe, but they are extremely difficult to interpret. They are affected not only by the quality of the information gathered—in other words, by whether a sufficient sample of supermarkets is being checked and whether it covers a suitable range of high quality and low cost supermarkets—but also by changes in exchange rates and according to the basket of goods chosen. I refer, for instance, to whether they reflect British buying habits or the buying habits of continental Europe.
All the evidence indicates that, although transport costs may be a factor, they are not the most significant factor. I remind the noble Baroness, Lady Miller, that although our fuel prices are higher, our other 627 commercial transport costs make us competitive in that respect with continental Europe.

§ Lord Marlesford
My Lords, does the Minister agree that if it was not for supermarkets, we would all be paying a lot more for our petrol and would have to pay the crazy prices charged on motorways?

§ Lord McIntosh of Haringey
My Lords, I hope that the noble Lord, Lord Marlesford, is not recommending that we travel many miles to supermarket petrol stations in order to save 1p or 2p on the price of petrol. That would not only be damaging from an environmental point of view, but would also cause a great deal of road congestion.

§ Lord Elton
My Lords, is the Minister aware of whether the practice of below-cost selling has had any effect on the farm gate prices of such products as British lamb?

§ Lord McIntosh of Haringey
My Lords, first, the Competition Commission report on below-cost selling, although it recognises that there is a problem in that regard, does not say that it is a universal problem or anything like it. Secondly, as I have already said, the danger of a prohibition on below-cost selling is that it would force down supplier prices and that would not be to the benefit of farmers.

§ Lord Mackie of Benshie
My Lords, can the noble Lord say whether he has any evidence of the suppliers—the primary producers—being able to force up prices? Is it not a fact that, in the case of Milk Marque, for example, any attempt to combine forces has been frustrated by legislation which forced the break-up of that body which might have kept the price reasonable?

§ Lord McIntosh of Haringey
My Lords, the Ministry of Agriculture, Fisheries and Food has a number of food chain initiatives in place to help farmers. I agree with the noble Lord, Lord Mackie, that it is extremely difficult for farmers to get together to exercise collective market power since they are necessarily fragmented. But they have task forces, which were recently announced by MAFF, to deal particularly with the case of milk, taking forward the recent work of the Food Chain Group. There has been continuing recognition of the need for a viable, competitive UK farming industry and the importance for that of the whole food chain. The difficulty is that the food chain is fragmented and there is little vertical integration.