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  • Cited by 1
  • Print publication year: 2009
  • Online publication date: June 2012

4 - Relationship between buyer and seller power in retailing: UK supermarkets (2000)

Summary

Introduction

In October 2000, the UK Competition Commission (CC) reported on its fifteen-month ‘supermarkets’ market investigation. This monopoly inquiry examined the supply of groceries from multiple stores (specifically supermarkets in chains of ten or more outlets with store sales areas greater than 600 sq. metres), looking at both the procurement side and retailing side of the sector.

While by no means the first investigation of this sector, the 2000 report issued by the CC turned out to be a watershed in respect of the depth and type of analysis for a sector-wide inquiry in the UK. This included detailed analysis of the geographic and product/service dimensions of the relevant economic markets and examining in considerable detail the structure, behaviour and performance of these markets using relatively sophisticated empirical methods.

A notable feature of the inquiry was the examination of circumstances when oligopolistic firms hold both buyer and seller power but no single firm holds a dominant position. Thus, the inquiry allowed for consideration of how the two forms of power can interact and how they may individually and in combination affect competition at successive stages of a supply chain. It is this relationship between retailer buyer and seller power that is the main theme of this review of the CC's findings and policy recommendations, which centres on the leading retailers' pricing practices and relations with suppliers and their consequences for market outcomes.