Innovation and competition in UK supermarkets

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Abstract
Argues that the developments in UK supermarket practice in recent years have resulted in a distinctive system of retailing in the UK, and that this has some important consequences for how one assesses the nature of competition in this market. In particular it means that standard approaches to assessing consumer benefits and the presence or absence of anti-competitive behaviour may not be appropriate. It is argued that UK supermarkets are delivering a quite different offering to the marketplace from a simple “basket of goods” with a specific price and quality. The issues of product range, innovation potential, and associated convenience factors are all part of the package. This leads to a consideration of the questions of “What is competing with what?” and “Who is competing with whom?”: the issue of comparing like with like. From there we arrive at the question of how competition policy in this field needs to consider long-term innovation potential as well as short-term price issues.

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