Sainsbury's has rubbished the Association of Convenience Stores claims of a 'waterbed effect' in its latest submission to the Competition Commission's grocery inquiry.

The ACS argues that smaller buyers such as wholesalers and small retailers suffer from detrimental treatment from suppliers forced to pass on price or service advantages only to the multiples.

However, Sainsbury's said that a study by RBB Economics showed this argument was flawed.

Although the study acknowledged that a waterbed effect could be theoretically established. "The results on which these results are founded tend to be somewhat contrived, and depend critically on assumptions that may have limited applicability to real world industries", it said. "The ACS model is driven by unrealistic assumptions that do not reflect the observed structure of the UK grocery industry."

The study highlighted the fact the inquiry's preliminary investigations had found no evidence of price differentials consistently in favour of larger retailers.

ACS chief executive James Lowman admitted the waterbed effect was a deeply theoretical discussion, but insisted there was evidence it was taking place in the UK market.

"There was no evidence in Emerging Thinking because the Commission only had 15 responses from the 40 suppliers it polled," said Lowman. "Its information was extremely limited at the time and we are glad it now seems to be digging much deeper. Between the GfK supplier survey, published along with Emerging Thinking, and our research into price differentials published last month, there is ample evidence that larger buyers can achieve benefits from suppliers to the detriment of smaller buyers."

In the GfK research many suppliers admitted that small customers can be affected by supply of product to some degree, particularly when there is a shortage or a larger customer increases demand. The ACS research concluded that 10% of products on a supermarket shelf were cheaper than the price a wholesaler could pay to its own suppliers.

"Proving the direct causal link for this is a debate that we still need to have," said Lowman.

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