UK government investigating supermarkets

Britain's Office of Fair Trading has asked the Competition Commission to launch an investigation of the supermarket industry.

The Office of Fair Trade (OFT), in a statement to the London Stock Exchange, cited concern about a number of factors among them the country's planning system and supermarkets' increased buying power which may be presenting barriers to new entrants.

It added that there was evidence that the rapid development of the convenience store sector may be harming consumers in local markets in terms of product variety and choice of fascia.

"The convenience sector has changed rapidly, and given our evidence and the importance of this market for consumers, our provisional view is that it would be appropriate for the Competition Commission to investigate," chief executive John Fingleton said.

There was an investigation in 2001, which found no problems. However, an article in Bloomberg notes that "specialist food retailers in the U.K. such as butchers and bakers closed at a rate of 50 a week from 1997 to 2002 ..." As important, no doubt, there is political pressure to investigate, coming from (among others) a 32,000-member trade group of small retailers.

The top four UK supermarket chains control 75% of the market.