While it was announced some time ago that the UK supermarket sector was being investigated by the UK Competition Commission, new details of the investigation have been leaked to the press and they do not make good reading for the sector leaders, Tesco and ASDA.  So what is happening?

It is believed that the Competition Commission have issued what are known as Section 109s to both groups, effectively forcing them to hand over millions of emails and letters relating to their negotiations with suppliers.  It has long been rumoured that the supermarkets have been exerting undue pressure on suppliers, many of whom are desperate to keep their business to stay a float.

Many retailers, not just the supermarkets, often ask suppliers to reduce their prices when the retailer is planning some kind of price promotion of special offers, effectively passing part of the cost on to their suppliers.  A common item such as the UK pint of milk has often been highlighted as an area where supermarkets have exerted undue pressure, with the cost of a pint actually going down in real terms for many years.  While the suppliers suffer from reduced payments, many supermarkets subtly use milk prices to tempt in customers, in effect a loss leader for many retailers.

The £120 billion supermarket sector has long be a bone of contention for many with a number of traditional “corner shops” squeezed out of business, unable to compete with the bigger companies.  While the authorities are investigating their relationship with suppliers, they are also looking at the overall power of the bigger supermarket chains and the fact that many are buying land to stop rival companies opening up “on their patch”.

It will be interesting to see if the Commission are brave enough to fight the big chains, who have seen their profiles and presence in and out of town centres, continue to rise.