For those 
who think that foreign retail giants are feared only in India, here’s an afterthought. They are feared in their own backyard as well! After a series of allegations, the Competition Commission (CC) of UK was asked to prepare a report on Tesco, Asda, Sainsbury and Morrison’s. In its 269 page report, CC has cleared the big four British supermarkets of allegedly cornering small retailers and forcing them to shut down.
Allegations were rife that these retail giants were hoarding empty lands so that they don’t face competition from other players. The primary cause of disdain was that suppliers had suspected that the concerned supermarkets were taking supplies from them on their own conditions in the absence of other options. This was the third inquiry ordered against retailers, lately.
Post completion of the inquiry, CC concluded that, “whilst UK grocery retailers are, in many respects, delivering a good deal for consumers, action are needed to improve competition in local markets and address relationships between retailers and their suppliers.” The only pro-customer aspect of the findings was the decision by CC to set-up an ombudsman or watchdog to look into areas of concern. Peter Freeman, Chairman, CC said that, “Changes to the existing Code of Practice… aim to improve the existing system by making it more proactive in tackling those practices, which can damage investment by suppliers.”
This has not gone well with retailers. British Retail Consortium Director General Stephen Robertson opines, “It is crucial that any new legislation does not damage customers by adding to costs and hampering the successful competition…” BRC is criticising recommendations for an ombudsman to rule on retailers’ relationships with suppliers saying that as the Commission has found no evidence of failure in these relationships, there can be any justification for a multi-million pound quango which would ultimately be paid for by customers. Since there are no clear guidelines on how this ombudsman will function or what the involved costs will be, it is impossible to work out the exact cost-structure and potential impact. Rosalind Plant seconds BRC, “We are not sure the main recommendations will improve the life of the British consumer.” Sir Terry Leahy, CEO, Tesco also voiced a similar opinion by saying that, “We believe it would take away power from consumers to choose where they shop.”
The report might have suggested many things or may intend many things, but it’s not doing what it was supposed to do, protecting small players. Its recommendation may facilitate competition between giants but it does nothing for small retailers as all the suggested measures were given on basis of market shares held by each retailer, which defies its purpose. Unless something concrete is done, small retailers will have to bow out of the race.
Vishal Ingole
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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
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