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Monday, February 8, 1999 Published at 14:07 GMT


Business: The Company File

Do supermarket customers get a raw deal?



Shoppers in the UK will learn soon if one of their hunches is to be vindicated, that supermarkets could be overcharging them for groceries.

The big four supermarkets, Tesco, Sainsbury, Asda and Safeway, stand accused of profiteering by using their market clout to drive down the amount of money paid to suppliers but failing to pass these on to shoppers in the form of lower prices.

The Office of Fair Trading (OFT), a government department which helps to ensure there is no abuse of power among businesses, is pursuing the matter.

OFT press officer Veronica Jackson said: "We will come to some conclusion at the end of this month as to whether we continue our inquiry into the supermarkets, or drop it."

Beefing about prices

Meat prices appear to be one of the major areas of concern, reflected in the plight of livestock farmers.


[ image:  ]
The sums paid by supermarkets for lamb and beef have fallen dramatically, while the prices charged to shoppers have not.

Using figures supplied by the Meat and Livestock Commission (MLC), it has been shown that the difference between the farmers' price for beef and that charged in the supermarkets had grown from 44% in December 1995 to 54% two years later.

A recent study of the meat market by the MLC concluded "retailers have not shared any of the decline in overall industry return at a time when producer prices have declined very substantially".

Pembrokeshire South West National Farmers Union spokesman Howell Davies said: "Some farmers are frightened to say or do anything even when they feel they have been unfairly treated.


[ image: Petrol: The supermarkets continually diversify into new product areas]
Petrol: The supermarkets continually diversify into new product areas
"The supermarkets are so powerful."

Mr Davies pointed out that some beef prices have fallen by as much as a half on where they were two years ago, but again, this is not reflected in the supermaket fridges.

"Farmers get irate about it. There could be an increase in goods bought if the prices dropped."

NFU spokesman Rebecca McAuley said: "We are pleased by the OFT inquiry. We would like to see greater transparency within the food chain.

"We want to see where the money is going. There are a lot of stages after the meat has left farmers."

Research has shown that the net profit margins of British supermarkets are on average 6%, double those of their European Union counterparts.

Supermarket defiance

Perhaps unsurprisingly, the supermarkets are adamant they provide genuine value of money.

Sainsbury spokesman Jason Steinberg said: "Any international price comparisons are fraught with danger.

"Our land costs are higher. UK supermarkets have the best consumer services, better than those in EU supermarkets. These elements are all included in the price.

Mr Steinberg went on to say that commodities purchased from suppliers have then to be processed, packaged and transported.

All this adds to what shoppers pay at the checkout.

High costs of living


[ image: Tesco has overtaken Sainsbury to become the UK's biggest grocery chain]
Tesco has overtaken Sainsbury to become the UK's biggest grocery chain
The UK's reputation as an expensive place to live is backed up by comparing the prices of a number of consumer goods.

Cars, CDs, and perfumes can all be bought more cheaply in the EU than in the UK, a fact accentuated by the relative strength of the pound.

Groceries is just one area where consumers are often left wondering why similar goods are cheaper on the continent.

Fair play

The OFT is one of the government's agencies that are charged with making sure there is fair competition in the market.

Any abuse of power, which could arise from a monopolistic trading position, can be stopped.

This latest OFT inquiry into the grocery business, launched last July, was prompted by the fact that the supermarkets had for 10 years escaped any close inspection.

By the end of February, the OFT will say announce that either its inquiry is halted or that it has enough evidence to warrant continuing with it.

If this is so, there is no indication of when such a report will be concluded and made public.



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