We have said all along that the country's biggest retailer would not stand idly by while its two main rivals fought for Safeway in what is now recognised as being the last big deal in British grocery. Like every commentator, we assumed Tesco would leverage itself into a position where it could pick up stores as Safeway was broken up. So we were stunned by news it was considering a bid.
But on reflection, Tesco's decision to join the feeding frenzy makes perfect sense. It is not whether Sir Terry has a hope in hell of winning this auction although he insists Tesco should be taken seriously. Instead the announcement this week is all about ensuring Tesco is better placed to influence the final outcome, primarily by ensuring the competition authorities will have to re-examine the structure of the food retail market and, in the process, stymie the bids placed by rival retailers.
On that front, it looks increasingly unlikely that Morrisons will win the day. But should it be successful, we would still have four powerful supermarket chains battling it out for supremacy on a national level. And for the vast majority of suppliers, and those in the independent sector, that would be the least unpleasant outcome. But if Asda/Wal-Mart, Sainsbury or, unlikely I know, Tesco win, we will be left with three major multiples fighting it out with obvious implications for the rest of the trade.
It is up to the competition authorities to decide if four will ever go into three. But those who lived through the tortuous Competition Commission inquiry into supermarkets in 1999 and 2000 were left with the impression that it felt any further consolidation among the bigger players would be a bad thing and would not necessarily lead to lower prices in the long term. Now is the time to put that hypothesis to the test.
But the competition authorities in this country have a track record of unpredictability. Be warned: on the evidence of the OFT's judgment on Tesco's takeover of T&S, they have absolutely no understanding of the real workings of the grocery industry. It is up to those against the four-into-three scenario to put forward a clear and well-argued case for maintaining the status quo.
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But on reflection, Tesco's decision to join the feeding frenzy makes perfect sense. It is not whether Sir Terry has a hope in hell of winning this auction although he insists Tesco should be taken seriously. Instead the announcement this week is all about ensuring Tesco is better placed to influence the final outcome, primarily by ensuring the competition authorities will have to re-examine the structure of the food retail market and, in the process, stymie the bids placed by rival retailers.
On that front, it looks increasingly unlikely that Morrisons will win the day. But should it be successful, we would still have four powerful supermarket chains battling it out for supremacy on a national level. And for the vast majority of suppliers, and those in the independent sector, that would be the least unpleasant outcome. But if Asda/Wal-Mart, Sainsbury or, unlikely I know, Tesco win, we will be left with three major multiples fighting it out with obvious implications for the rest of the trade.
It is up to the competition authorities to decide if four will ever go into three. But those who lived through the tortuous Competition Commission inquiry into supermarkets in 1999 and 2000 were left with the impression that it felt any further consolidation among the bigger players would be a bad thing and would not necessarily lead to lower prices in the long term. Now is the time to put that hypothesis to the test.
But the competition authorities in this country have a track record of unpredictability. Be warned: on the evidence of the OFT's judgment on Tesco's takeover of T&S, they have absolutely no understanding of the real workings of the grocery industry. It is up to those against the four-into-three scenario to put forward a clear and well-argued case for maintaining the status quo.
{{COMMENT & LETTERS }}
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