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Supermarkets: raided again!

• Robert Peston
• 27 Apr 08, 02:24 PM

Another day, another raid by the competition watchdog, the , on our big supermarket groups.

This one took place last week and was an attempt to gather information of alleged price collusion on .

Actually to call it a raid may be to slightly over-glamourise it, in that it was carried out without a court order. That said, the OFT never goes on pure fishing exercises. It has reason to believe the supermarkets may have engaged in unacceptable pricing practices, even if it cannot be sure that the law has been broken.

What triggered this latest probe? It's difficult to be sure, but there is a possibility that one supermarket has identified possible price-fixing and has attempted to obtain leniency by co-operating with the OFT.

There is a resonant recent precedent. In the recently disclosed tobacco case, I have learned that Sainsbury has been given immunity, having from 2003 onwards agreed to provide relevant information.

Just in the past few months, the OFT has explicitly or implicitly accused supermarkets of anti-competitive behaviour in three separate areas: milk, cigarettes and now this latest more generalised case.

Which is a bit odd, since the other British competition watchdog, the , has - in its long-running enquiry into grocery retailing - concluded that supermarkets operate in a highly competitive market.

So is there a contradiction between the OFT's attempted reinvention of itself as the cartel-busting Untouchables of the food retailing bit of our economy and the Competition Commission's general thesis that the supermarkets spend most of their waking hours trying to kill each other?

Not really. Across the many thousands of products sold by supermarkets, it's always possible that rogue managers will attempt to stifle legitimate competiton.

Also when homogeneous products are being sold, the scope to woo customers other than through price is limited. And the penalties in the form of lost sales from being out of line on price are such that there is a dangerous incentive for retailing managers to coordinate prices.

Price rigging may not have occurred - and all the supermarkets have today denied that they have done anything to damage the interests of their customers. But don't assume it cannot have occurred, as a matter of principle, just because in general supermarkets compete hard.

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