Skip to main content

Food Producers

Volume 468: debated on Thursday 6 December 2007

5. What discussions he has had with Cabinet colleagues and the competition authorities on the role of food producers in the grocery supply chain. (171734)

The hon. Gentleman will know that the Competition Commission is currently conducting an inquiry into the groceries market. My colleague Lord Rooker wrote to the Commission when it opened the inquiry, listing some questions that he thought should be considered, and his letter has been published on the Competition Commission website. However, in line with the general policy of Government, neither I nor other DEFRA Ministers have had discussions about the inquiry with Cabinet members, or indeed with the competition authorities.

According to the provisional findings of the Competition Commission, published at the end of October, grocery retailers are transferring

“excessive risk and costs to suppliers”.

Moreover, there is already a concentration in the grocery sector whereby four major retailers control 80 per cent. of the market. That concentration is likely to increase, and the trend among supermarkets to move from effective use to unacceptable abuse of their power is therefore likely to increase as well. Does the Minister not accept that this is a matter for her Department, which should get a grip on it, that she should start discussing it with her colleagues in the Cabinet, and that the Department should prepare plans to ensure that suppliers are properly protected in the grocery supply chain?

I understand the points that the hon. Gentleman has made, and I know that he has taken a keen interest in these matters, not least in his constituency. However, I am sorry to say that it would be inappropriate for me to comment at this stage, when the Competition Commission has published only its preliminary findings and when there is an opportunity for those who participated in the inquiry to comment on their initial findings. I understand that the commission will report early in the new year, and when it has done so Ministers will give an appropriate response if recommendations are made to the Government.

I am sure my hon. Friend is aware that part of the major problem we face is the power of the big four squeezing down farm gate prices and putting farmers out of business. That kind of competition needs to be examined closely, as should the power of supermarkets that hold land and prevent other companies from using sites because they will not sell them.

My hon. Friend is absolutely right, and I can tell him that the Competition Commission has concluded that some retailer landholdings and practices such as restrictive covenants may indeed hinder competition.

The commission says that a variety of means could be applied, and we will consider them at the appropriate time. It suggests that grocery retailers might divest themselves of their landholdings; that they could be prohibited from using restrictive covenants that reduce the likelihood of land being used by a competitor; that changes could be made to the planning system that would provide more opportunities for developments on the edge of town centres while maintaining constraints on out-of-town developments; and that it might be possible to introduce a competition test allowing the local position of grocery retailers to be considered in the making of planning decisions. Those are all important initial findings, and as I said, we will take them into account if and when recommendations are made to the Government.