Britain's big four supermarket chains face an official inquiry into whether their dominance of the £87 billion sterling ($143 billion) a year British grocery market is bad for consumers. The Office of Fair Trading (OFT) said it is to investigate the profitability of Asda, Sainsbury, Safeway and Tesco, news which sent their shares sharply lower.
Tesco is also one of the biggest players in the Irish supermarket sector, through its Quinnsworth and Crazyprices subsidiary, and has more than 20 per cent of the Irish grocery sector. Safeway is planning an entry into the Irish market, while Sainsbury is also thought to be planning an expansion into the Republic.
The four control 45 per cent of the British market and their profit margins are the envy of European chains. OFT chief, Mr John Bridgeman, announced the probe in response to concerns raised about their buying power from the farming sector and elsewhere.
The investigation comes amid growing official scrutiny of the supermarkets' wider influences. The big four narrowly escaped a supermarket car-park tax in recent draft government transport legislation, and planning permission for new out-of-town stores has become harder to obtain.
Similar investigations in the past have cleared the multiples of any blame. Mr Bridgeman pointed to a Monopolies and Mergers Commission probe in the early 1980s which decided that discounts secured from suppliers were largely passed on to consumers through lower prices.
However in the past 15 years, the market share and market power of supermarkets has increased, he said. "While I have no specific evidence that would lead me to reverse the previously held conclusion. . . I believe that the time is right for a detailed study of the sector focusing in particular on grocery products of the four major supermarket groups," Mr Bridgeman said.
