Are market power and planning restrictions impeding the retail sector?
In the retail sector, the recent Competition Commission enquiry concluded that in general the supermarket sector operates in a competitive environment and that price differentials with the European Union could mainly be explained by the strong exchange rate. However, market power, both buying and selling power on the part of large retailers, remains a problem. In particular, the enquiry found that retailers have used their market (buyer) power to the detriment of suppliers and competitors. In light of this, the OFT negotiated a code of practice to govern buyer-supplier relationships in this sector, although it is not clear that this will resolve the problems and the competition authorities will need to remain vigilant. As regards entry into the sector, the government’s recent approach to planning has made new large scale entry very difficult. Competition in the market is thus impeded both by inhibiting entry and by preventing firms from growing in size to achieve their full productivit
