Company Of The Week: Sainsbury's
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Your support makes all the difference.SHARES in supermarkets led by Sainsbury's were active on speculation that the Office of Fair Trading has asked the Monopolies and Mergers Commission to investigate the industry. This follows an eight-month probe into claims that supermarkets are abusing their buying power.
It was a classic case in the stock market of anticipation being worse than the event. Shares in Sainsbury's, which have fallen steadily from a high of 580p last October to 344p on 11 March, rose more than 6 per cent last week. Tesco's rose 4 per cent, and Asda shares rose 3 per cent.
The OFT wouldn't confirm the referral and a spokeswoman said it will probably announce its findings after Easter. It began its inquiry in July in response to concern that retailers weren't passing on declines in the price of some meats to customers. Analysts said it would be hard for the Government to force supermarkets to charge less, although they expect the MMC investigation to fuel price competition.
"It will keep the spotlight on prices for six to eight months," said Steve Woolf, an analyst at Paribas. "But it will be a chance for supermarkets to clear their name."
Asda chief executive Allan Leighton said the UK's third-largest supermarket company has "nothing to fear from an MMC inquiry". He said the OFT confirmed in meetings that Asda's prices and margins are lower than its rivals and its profits are "beyond criticism". Tesco, Britain's largest food retailer, wouldn't comment.
The MMC has a wider remit than the OFT. Its studies consider issues relating to both public interest and competition. The findings of MMC inquiries are sent to the Department of Trade and Industry, which decides what action to take. Richard Hyman, an analyst at Verdict Research, said the Government's power to intervene is limited. "If people do think supermarkets charge too much, what is the Government going to do about it?" he said. "Are they going to start setting prices?"
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