Monopoly – the Only Game in Town

The Office of Fair Trading is giving Britain’s superstores exactly what they want

By George Monbiot. Published in the Guardian 14th January 1999.

When the Office of Fair Trading announced that it was conducting an investigation into the superstores, to determine whether or not they are trading fairly, every small shopkeeper in Britain breathed a grateful sigh of relief. At last their claims that the explosion in out-of town development and the superstores’ stranglehold on suppliers are murdering the high street and the corner shop were being taken seriously. They’ll get a shock when they read the OFT’s report: insiders say that its principal recommendation is more out-of-town development.

The Office of Fair Trading argues, we’re told, that the moratorium on building out-of-town superstores, imposed in 1996, slammed the door on competition from other big retailers – in particular “discount warehouses” from Europe – which were hoping to enter the market. Lifting the moratorium would let them in, forcing the superstores to reduce their prices.

At first glance, the OFT’s reported solution looks like an appropriate response to the problem. In 1993, when the big discount stores first tried to establish themselves in Britain, Tesco, Sainsbury and Safeway clubbed together to hire PR consultants and wage a court battle against the new retailers’ planning applications. They succeeded in deflecting the threat to their cosy partition of the market. When, three years later, the moratorium was introduced, they and their only remaining large competitor, ASDA, could concentrate on dividing the spoils of British consumption between them. The outcome could fairly be described as a complex monopoly: four huge companies acting independently but trading in an almost identical manner. Staggering profit margins and predatory relationships with their suppliers are among the predictable results.

But, far from relieving us from their tyranny, the OFT’s proposal will simply compound it. Planning laws specifically prohibit local authorities from discriminating on the basis of an applicant’s identity. Their purpose is to regulate changes in land use, not changes in ownership. The existing superstores have already lined up hundreds of planning applications. They have the best planning consultants money can buy, and our political leaders sit in the palms of their hands. Lifting the out-of-town moratorium to allow the discount stores a foothold, in other words, will simply enable the existing stores to consummate their monopoly.

The OFT’s report could be just the excuse New Labour is looking for to renew its subscription to the Fat Cats’ Protection League. A year ago, SuperMarketing magazine predicted that “while the government will publicly continue to pay lip-service to the anti-development lobby, in private, paths will be smoothed over. … Relaxations in planning law are likely within two years”. While the moratorium might have served the superstores well four years ago, today they see it, once again, as the principal impediment to expansion. The future, their analysts have told them, lies in what could be described as private towns: out-of-town gigastores of 100,000 square feet or more, surrounded by new housing. Only when the moratorium is lifted can this engineering of captive markets begin.

The OFT’s problem is that its terms of reference are cripplingly narrow. The only substantial issue it is examining is the price consumers pay. That farmers and small manufacturers are being driven out of business in swarms as the superstores pay them less than the cost of production for their goods is of little interest to the OFT. That small shops and markets are all but extinct in parts of Britain, that many of the costs the superstores should bear are instead dumped on society, are beyond the scope of its inquiry. As long as none of the superstores achieves a national market share of more than 25 per cent, and as long as the prices they charge consumers are neither identical nor universally higher than those charged in small shops, they are deemed to be trading fairly. Last year, the head of the OFT’s inquiry boasted to journalists that “We have always taken the view that the growth of the supermarkets is broadly in the consumer interest. We have no specific intent to go back from that now.” To prove it, his investigation took evidence from just four parties: the superstores.

The Office of Fair Trading has investigated the wrong problem and, it appears, proposed the wrong solution. The superstores need fewer sites, not more. They need proper regulation: perhaps, as the fruit growers’ association has recommended, an independent regulator. They should be taxed to reflect the costs they transfer to society and the environment. Instead, the OFT will, as a harsh and authoritarian punishment for their crimes against society, give them precisely what they most desire.