Report critical of retail giants

Pressure is mounting on the British government to crack down on the growing dominance of British food retailers as they were yesterday accused of exploiting customers and suppliers.

A report commissioned by the Office of Fair Trading (OFT) in Britain called for a full-scale inquiry into the retailers' power and profitability and warned against further consolidation.

The report itself stopped short of accusing supermarket chains of profiteering but Mr Paul Dobson, an economist at Loughborough University and joint author of the study, said it clearly indicated that food retailers were squeezing suppliers without passing on gains to customers.

"Gross and net margins are rising, which means they are basically getting better deals from suppliers and higher prices from customers," he said.

The dominance of the big four food retailers - which together control more than 60 per cent of supermarket sales - had created a lack of true competition, he said.

The OFT said yesterday the report did not represent official policy. But it is likely to be considered as part of the preliminary investigation launched in July into whether supermarket groups are abusing their market power.

Tesco, Britain's biggest food retailer, said the report was based on out-of-date information. "Margins have fallen in the last five years and we are much more competitive than we have been," the group said.

Safeway attacked the report as "merely fuelling some ill-founded claims being aired in certain media".