Retailers get easy ride from regulator

Moves to investigate the share dealings of individual executives have been far swifter than efforts to regulate supermarkets’ trading.

Why is it that some people do their jobs as they are meant to and to our satisfaction, while others in the same industry appear not really to understand why they are there? Why, for instance, do the Czech Republic and Greece play football as if they want to win, while England play as though they are hoping not to lose? And, when it comes to the business of regulation, why do some aspects of commercial life appear to be well regulated, while others are subject to a kind of laissez-faire libertarianism?

These questions arise from the juxtaposition of two current examples of commercial regulation in active practice – the first in the retail industry and the second in the equities markets of the City.

It’s not with a sense of déjÃÂ vu that I read that the Office of Fair Trading (OFT) is investigating the relationship of the major supermarket chains with their suppliers. If that were the case one would feel a sense of déjÃÂ vu when the English summer comes and it rains – or when England loses in a major football tournament on penalties. It’s less of a strange feeling that we’ve been here before than a sense that this is the natural order of things – a great British tradition.

Supermarkets being investigated by the OFT over the way they treat suppliers is like a seasonal phenomenon, such as the first cuckoo of spring or Tony Blair promising to deliver on his pledges for public services.

It would be too tedious to recount how many times the usual supermarket suspects – Asda, Tesco, Sainsbury’s and Safeway – have been marched in and out of the OFT to justify their treatment of suppliers. Protracted previous investigations, when the OFT has knocked the investigative responsibilities upstairs to the Monopolies and Mergers Commission and its successor organisation the Competition Commission, have invariably come up with little tangible evidence of competitive malpractice and the supermarkets have escaped with pusillanimous reprimands and the imposition of vapid and voluntary codes of conduct. All this despite repeated claims from suppliers of aggressive and manipulative contracting and levels of profiteering at suppliers’ expense that, if only partially true, would verge on the usurious.

Now the supermarkets are back at the OFT again, because there is a widespread belief that the voluntary code of conduct that arose out of the last inquiry has been breached. This is about as surprising as sharks violating a code of conduct governing swimmers’ rights at the seaside. The supermarkets could almost block out time every year in their diaries for their visits to the OFT. Go to the OFT in early summer – get away with it in mid-autumn. Being a supermarket supplier must feel like being a health-service manager under Blair.

Compare this experience of being whipped with a liquorice cane in the retail industries with the kind of regulatory urgency that is applied to dealing in equities, if there’s any suspicion there that comparable profiteering has occurred.

I’m thinking, of course, of the growing speculation that all is not as it should have been in the trading of shares in Marks & Spencer ahead of Philip Green mounting his £8bn-plus siege of this venerable business. The story is unfolding on a daily basis and there is no need for me to go into the questions of when and why Stuart Rose, the new chief executive, bought his interest and when and why he met Green ahead of that purchase. Nor do I need to rehearse speculation about the role of Rose’s friend, Michael Spencer, who has also cleaned up in M&S stock-dealing.

The Financial Services Authority has been tenacious in its initial response to such revelations arising in the wholesale equities markets. Rose and Spencer – and indeed Green – can expect to receive the undivided attentions of the FSA during a series of continuing interviews. And, let’s be clear, there is no evidence that any of these individuals has done anything wrong in their M&S dealings – but the regulator is taking its responsibilities seriously in investigating any possibility of malpractice.

Now compare that standard of regulation with the dilatory manner in which the OFT approaches its duties. I appreciate that there are constitutional differences between these watchdogs – the FSA is a statutory body with legislative powers of sanction, while the OFT is an office of government which can refer cases where there is evidence of competitive malpractice. But I wonder why there should be such a discrepancy between regulation addressing ownership of the retail industry and that addressing how that industry conducts its business.

And I fear I know the answer and it’s simple: the ownership of the retail industry is deemed more important than the customers it serves.

George Pitcher is a partner at communications management consultancy Luther Pendragon


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