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TDs' supermarket swoop

September 25, 2006
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(Daily Mail Via Thomson Dialog NewsEdge) IRELAND's major grocery retailers may face a probe into alleged abuse of their market dominance after a call from a powerful Dil committee.

The panel wants the Competition Authority to use its powers to look into the turnover and profits of major retailers such as Tesco, Dunnes Stores and Supervalu over concerns that shoppers are being ripped off over food prices.

The news comes despite the recent abolition of the Groceries Order, which prevented retailers from passing the benefit of bulk discounts on to consumers.

While the latest inflation figures showed items covered by the order fell by 0.2 per cent in the past year, other items increased in price by 3.5 per cent, giving rise to general rises of 0.8 per cent for groceries overall.

The call for the probe into the Irish grocery sector comes after a report compiled by Fine Gael Senator Paul Coghlan into the British retail sector, which identified evidenceof anti-competitive behaviourby some of the major grocery multiples.



Writing in the report - formally adopted by the Oireachtas Enterprise Committee yesterday - Senator Coghlan noted suggestions that the UK major multiples were engaged in anti-competitive behaviour to the 'ultimate detriment of consumers'.

Senator Coghlan concluded that there was clear evidence of pricefixing by large retailers in the UK, and expressed fears that the same abuses could now be taking place here.

He also noted the existence of 'price-flexing' in the UK, whereby smaller retailers were put at a competitive disadvantage by being forced to pay more for the same products than their larger retail counterparts.

Typically, the multiple retailer takes a large order from a particular supplier, on condition that the supplier makes other smaller retailers pay more for the same product.

Calling for a probe similar to that now under way in the UK by the Competition Commission, he said: 'The Competition Authority in Ireland must now launch its own investigation into competition in the retail grocery sector, particularly-since some UK retailers are major operators in the Irish market.' The hard-hitting report also calls on the Competition Authority to investigate large retailers' strategic purchases of land banks across the country.

Typically these land banks lie fallow until another retailer attempts to set up in the same location, or in close proximity.

Once this happens, the owner of the land bank develops a new retail outlet with a view to killing off the potential competition.

In a hard-hitting conclusion, the Enterprise Committee's report states: 'In retail planning terms, competition should be a relevant factor in granting permission for stores.

'Where an existing retailer already has a presence in a town, then there should be an inhibition on a new store being opened or acquired in that town, unless it can be shown that local competition will not suffer.' The report also calls for an examination of restrictive covenants on the part of retailers, which prevent competitors from setting up in locations they have since abandoned.

The report concludes: 'This is blatantly anti-competitive.' There are also calls in the report for a reform of the planning laws to ensure competition in the groceries trade.

Currently, planning applications for new grocery outlets are often rejected on the grounds that a particular location is already served by a major retailer.

On a more fundamental level, there is even a call for an assessment of the impact of the different parking regimes for outlet retailers compared with those operating in town centres.

Senator Coghlan expressed his concern at the growing power of major grocery retailers in Ireland.

He added: 'Consumers have a right to a wide range of goods at the lowest possible prices.

'In order for this to happen, we need to constantly review the growth of the multiple retailers because they have the power to exercise enormous influence over suppliers, producers, smaller competitors and consumers.'

Copyright 2006 Daily Mail. Source: Financial Times Information Limited - Europe Intelligence Wire.


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