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Low prices bad for consumers

The Competition Commission has released a report on Supermarkets

We found that all the main parties (with the exception of M&S and Lidl) engaged in the practice of persistently selling some frequently purchased products below cost, and that this contributed to the situation in which the majority of their products were not fully exposed to competitive pressure and distorted competition in the supply of groceries. We took account of the fact that some consumers could benefit from being able to buy goods below cost, particularly low-income consumers, but at the same time that the practice damaged smaller reference stores and non-reference grocery outlets. This would in turn impact adversely on consumers, in particular the elderly and less mobile who tend to rely more on such stores. We conclude that the practice of persistent below-cost selling when conducted by Asda, Morrison, Safeway, Sainsbury and Tesco, ie those parties with market power, operates against the public interest.
We found that the practice of varying prices in different geographical locations in the light of local competitive conditions, such variation not being related to costs (which we termed ‘price flexing’), was carried on by Budgens, the Co-ops, Netto, Safeway, Sainsbury, Somerfield and Tesco. We found that this practice contributed to a situation in which the majority of their products were not fully exposed to competitive pressures and which distorted competition in the supply of groceries. We conclude that the practice, when carried on by Safeway, Sainsbury and Tesco, who have market power, operates against the public interest because their customers tend to pay more at stores that do not face particular competitors than they would if those competitors were present in the area.
The evidence we received showed a high degree of satisfaction with supermarkets by those who shopped in them

So low prices are bad for consumers for some reason and the normal market mechanism which indicates a stronger than average demand in a geographic area (higher than average prices), and thus a signal for competitors to move in is "unfair". A sensible planned economy wouldn't allow these anomalies, in fact it would be much more sensible if there was just one government run store and the citizens were told what to buy.....

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GUM anyone?

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