Supermarkets in trouble again

The Guardian had a splash on Saturday with yet another attack on the big supermarkets. On this occasion it accused Asda and Tesco of having raised their prices in the weeks running up to Christmas. Former Office of Fair Trading (OFT) Director-General Sir John Bridgeman, now supplementing his retirement income as an “international consumer consultant”, described this as a “systematic, cynical and aggressive attempt to exploit demand.”

 

Tesco and Asda deny this, pointing out that some prices rise as special offers end, while others are being cut as new promotions come into force. And while Bridgeman and The Guardian argue that some of the price rises fall on goods for which there is increased demand at Christmas (such as the Peppa Pig playset), other increases were on more mundane items such as lightbulbs, toothbrushes and teacakes.

 

The supermarkets can’t win: recently they have been castigated for low prices on alcoholic drinks (encouraging binge drinkers), food (exploiting farmers) and clothes (exploiting Third World clothes manufacturers). When prices rise, on the other hand, they are exploiting consumers.

 

I hold no brief for supermarkets, but why do they need to defend themselves?

 

What is wrong with them charging more for goods in high demand and cutting prices on goods where demand is low? Such behaviour will ultimately maximise the profits which keep employees in jobs, contribute to our fiscal deficit and to the dividends on which our pension funds depend. High profits can be attacked if they result from excessive market power – but supermarkets do not possess this, despite the repeated efforts to convict them over the last 15 years by Sir John and his OFT cohorts.

 

Leave them alone. The supermarket sector is one of the UK’s greatest success stories and doesn’t deserve the continual drip, drip, drip of spurious allegations. The Guardian’s expose has nothing to offer policymakers. What does it want, a ministry controlling all the hundreds of thousands of prices which Tesco, Asda et al. change every year? How would that work?

Imagine if supermarkets did not raise prices when there was high demand. “Maximum two toilet rolls please”, “join the queue here for bread”. Nobody would have an incentive to economise if prices did not reflect demand. Buying bread would be like buying “Gogo hamsters” and I can assure you, as somebody whose daughter wanted a “gogo hamster” for Christmas, that I would rather pay extra for bread than go through the shenanigans we had to go through to buy a gogo hamster each time we want a loaf of bread. I suppose that Bridgeman believes that prices should reflect the cost of production rather than demand (like fair traders) – the only problem with that is that nobody would know what to produce

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