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Thursday, July 30, 1998 Published at 09:52 GMT 10:52 UK

Business: The Company File

Supermarket profits probed

Are shoppers getting a poor deal from supermarkets?

The consumer watchdog is to investigate the profitability of the supermarkets amid concerns that shoppers are losing out.

The Office of Fair Trading probe will affect major groups including Asda, Sainsbury's, Safeway and Tesco.

In the past, the general view has been that competition between the large supermarkets has led to lower grocery prices for shoppers.

[ image: The probe will centre on groceries]
The probe will centre on groceries
But the new inquiry will look at whether they are now so powerful that their buying power is damaging farmers and suppliers and increasing their profits rather than cutting prices for shoppers.

Director General of Fair Trading John Bridgeman said: "The supermarket sector is one that my office keeps under review and concern about the power of the main players is something of a recurrent theme.

"Over the past few months a number of concerns have been raised about the level of buyer power that the major supermarket groups are able to exercise.

"My enquiry will focus on whether competition between the majors has been distorted to the detriment of consumers."

Growth in power

Over the last 15 years the market share and market power of the major supermarket grocers has grown steadily.

Mr Bridgeman added: "While I have no specific evidence that would lead me to reverse the previously held conclusion as to the balance of consumer interest, I believe that the time is right for a detailed study of the sector.

"It will focus in particular on the profitability in grocery products of the four major supermarket groups.

"I believe that placing our conclusions in the public domain will be in the best interests of the supermarkets themselves, given the level of disquiet about their activities that surfaces from time to time."

The OFT's preliminary report should be completed by the end of 1998 when Mr Bridgeman will decide whether further action is necessary.

Shares in several leading food retailers opened lower after news of the inquiry broke.

Supermarkets pledge value

Sainsbury's responded to news of the OFT inquiry, by maintaining its customers always received the best value.

Sainsbury's group chief executive Dino Adriano said: "We monitor our prices against those of our competitors every week to ensure that our customers receive the very best value.

"We will be giving the OFT inquiry team our full co-operation."

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