Glorious News!

Supermarkets that use their size to force down prices will be penalised under a plan to encourage competition and choice for consumers. The Competition Commission is today expected to recommend changes to discourage chains from developing local monopolies and forcing smaller stores out of business.

Isn\’t that fabulous? You will be forced to pay higher prices so that the local capitalists can continue to gouge you.

We seem to have imported the policies of Pierre Poujade, the man who gave Jean-Marie le Pen his political start. Our local socialists do seem to be getting a little national on us, don\’t they?

8 thoughts on “Glorious News!”

  1. “Supermarkets that use their size to force down prices will be penalised under a plan to encourage competition and choice for consumers. “

    How does forcing down prices stifle competition? Are there people out there who say ‘Gosh, if only we could pay more for these gods…’?

  2. “How does forcing down prices stifle competition?”

    In theory, Tesco is sufficiently profitable at group level that it could cross-subsidise a particular store to charge below-cost prices until Mr Patel next door goes out of business – and then to ramp them up again once it has a monopoly.

    AIUI the CC is referring to this cross-subsidy, not economies of scale, in the bit the Guardian reports as “using their size”.

    In practice, “predatory pricing” is massively abused to protect producers rather than customers – but there are sometimes occasions when it’s a genuine issue.

  3. “In theory, Tesco is sufficiently profitable at group level that it could cross-subsidise a particular store to charge below-cost prices until Mr Patel next door goes out of business – and then to ramp them up again once it has a monopoly. “

    In theory, almost anything could happen. But should that occur, people will just go elsewhere – not to Mr Patel’s but to the rival supermarket further out who would almost certainly be cutting its prices to attract customers. Thus increasing pollution, congestion, etc…

  4. It is important that there are not monopolies on a local scale, i.e. the scale we live and shop at. However, do companies like Tesco actually do this predatory pricing? I mean I can understand the driving people out of business bit, though I don’t necessarily agree with it, but do they actually ramp them up thereafter to a level higher than consumers paid prior to their arrival? I doubt it. If monopolies don’t extort the rent they could then they aren’t nearly as bad as the connotations the word carries.

    My experience is that Tesco’s is cheap pretty much everywhere, not just in areas with fierce local competition.

  5. If Supermarkets to use predatory pricing to close down the opposition and then ramp up prices they will make it beneficial for Mr Patel to enter the market again. The barriers to entry are fairly low in the shop keeping business, especially with property prices stalling.

    This predatory pricing argument only really works when the barries to entry are very high, say in the mobile industry where building a national network can cost upwords of £500m.

  6. Interesting that you mention the poujadists, Tim. Strolling through a French town last week, I couldn’t help noticing that, despite the presence on the outskirts one of those enormous marchés that make a Tesco Extra look like a mom & pop store, no shortage of butchers, grocers, bakers all doing brisk trade. Come to think of it, that list’s only three long because the French have food shops in abundance that we don’t even have names for any more. Cheese shop? sausage shop? cake shop?… OK, you pay a tad more but the variety, the quality.
    Maybe it’s Mr Patel’s collection of tired lettuces, tinned ham and near its sell by date Wonderloaf that has something to do with it?

  7. …tired lettuces, tinned ham and near its sell by date Wonderloaf…

    When I lived in Bradford, the only places you could get decent fresh veg were Morrisons, Tesco and Safeway. The so-called greengrocers the length of the Leeds Road were little more than large-scale compost heaps.

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