Ban on below-cost selling should be revoked

Groceries order: The ban on below-cost selling of groceries works against consumers, inflates food prices and should be abandoned, according to a Government-commissioned report.

The Consumer Strategy Group's report to the Government calls for the ban, contained in the groceries order, to be revoked immediately.

However, the Government is likely to respond to the call by spending three months inviting submissions on the ban from interested groups, before making a final decision.

The report argues that the groceries order prevents retailers from selling goods for below their wholesale invoice price.

However, it points out that the provision takes no account of discounts on the actual invoice prices that suppliers commonly give to retailers, particularly the large supermarkets.

These deals result in savings of up to 18 per cent for retailers. But the report says that, as they are not reflected on the suppliers' invoices, it is illegal to pass them on to consumers.

It adds that this allows the supplier to effectively determine the retail price, something which the order also forbids.

The report argues that the ban keeps consumer prices higher than they should be.

"For that reason, the group is convinced that the actual operation of the groceries order is inherently against the interests of consumers," it says.

"The group's analysis of the groceries order has found that the order has the effect of placing upward pressure on grocery prices, through the inability of supermarkets to pass on discounts, and thereby adversely affects consumers.

"The group believes that free competition in markets is the most effective way to protect consumers," it states.

The Consumer Strategy Group is the latest in a long line of bodies, including the Competition Authority and the National Council for Competitiveness, to come out against the below-cost selling ban.

However, independent retailers' group RGDATA, and organisations representing food producers, argue that revoking the groceries order will ultimately damage consumers by pricing the independent players out of business, and leaving shoppers at the mercy of big supermarket chains.

The report argues that a good planning process, which adequately deals with consumers' needs, would ensure they have access to a choice of shops.