The Cooperatition Incubator

On 26 October 2011 the Environmental Audit Committee discussed barriers to co-operation among supermarkets:

Q246 Katy Clark: The Food Ethics Council said that competition law may be preventing co-operation among the major supermarkets to use their buying power to support more sustainable products being developed. Do you recognise that as a problem?

Jane Bevis: Certainly in terms of their impact on the supply chain, supermarkets do need to be very cognisant of competition law and be careful about the way they go about things. In areas where they have relatively little influence, then coming together and agreeing with other partners in the supply chain that there is a better way of doing things and moving forward so that everybody feels this is a win-win situation, you can still make progress, but yes, there will be times where they feel they can’t come together to do something precisely because they would risk being in breach of competition law.

Bob Gordon: I would just add that I sit on the steering group of the Product Research Forum with a number of retailers, brands, WRAP and Defra. We talk very openly about what the issues are, what potential opportunities there are, and we talk about that in a pre-competitive context, so we are understanding the context and then, if any voluntary commitment is established as a result of those conversations, the individual businesses that sign up to that commitment will compete vigorously to achieve it in a way that not only gets them to achieve those sustainability goals, but also improves their market share.

[Ed - The key word in Bob Gordon's analysis is "if".  As a result of competition law regulation too many agreements are being scuppered.]

On 7 December 2011 this issue was further explored by the Environmental Audit Committee:

Q362 Zac Goldsmith: The Food Ethics Council-I am just checking it was them-has said the competition law could be preventing co-operation between the supermarkets in relation to pursuing sustainable food consumption. Is that a problem that you recognise?

Mr Paice: I recognise that the supermarkets are extremely nervous about competition law. You may be aware that a few years ago most of the major supermarkets were fined pretty heftily by the OFT for collusion on the issue of milk prices. It is not for me to judge the rights and wrongs of the case, but that is what has happened, and a consequence of that is that they are extremely wary about even being in the same room together. We do have periodic meetings with the senior chief executives of the supermarkets, but it is on a very clear agenda that makes sure that there is nothing-we can’t talk about price or anything that could be construed as collusion. I can see the argument that they would be very nervous of it, yes. You would need to ask a lawyer whether in reality there is something in competition law that says they should not work together on sustainability. I don’t know. That would be for a lawyer to judge, but I am very conscious of their sensitivity over anything like that.

Writing in The Guardian on 28 December 2011, Patrick Wintour  identifies competition law as an area where consensus in the coalition could drive reform:

“Jesse Norman’s latest attack on crony capitalism shows there is a thirst for action amongst influential thinkers on the Tory benches. He says of the two distinguishing features of crony capitalism: “Business action loses any relation to the wider public interest and business reward is separated from business merit. Crony capitalism is what happens when the constraints of law and markets and culture cease to be effective. Entrepreneurship and value creation are replaced by rent-seeking, and certain groups become enormously wealthy without taking risks.”

“Norman argues that this makes for a less efficient and unbalanced economy. This could be the big domestic political dispute of 2012. Conservatives in this camp believe Cameron can pull off an intellectual heist by presenting himself as the man to rescue Britain from the predatory crony capitalism that Labour had allowed to develop.

“Their argument is that crony capitalism really took root in the late 1990s when the Bank of England ceased to be responsible for systemic risk in financial markets, the doctrine of inflation targeting was institutionalised, and the banks were allowed to ramp up borrowing. All this occurred under a Labour government, 10 years after the sudden deregulation of financial markets under Thatcher that was known as Big Bang.

“Under this argument, issues such as corporate governance, tackling short-termism among investors, rethinking competition law and building strong regions around new democratic institutions such as city mayors will come to the fore. They will be the building blocks for economic growth.

“There is an appetite for this agenda across the coalition. Ed Miliband’s half-formed outburst against predatory capitalism could be wrested from him and become the new consensus. Politics is that fast and cruel.”