Sir, - Sounding suspiciously like the narrow view that the Competition Authority has been peddling for over a year now was John McManus's assertion that the Groceries Order "keeps food prices artificially high" (Business This Week, October 19th). An examination of the facts reveals this to be untrue. Food price inflation in Ireland over the longer term has been lower than that in the UK or the EU. Of course food price inflation is higher in Ireland at the moment as this part of the economy is under the same inflationary pressures as other sectors. It is hardly reasonable to blame the Groceries Order for this, but opponents of the order find it convenient to use the present concern about inflation to argue against its retention.
The purpose of the Groceries Order (which prevents supermarkets selling most grocery products below cost) is to encourage the development of a high quality food retailing industry for the benefit of the maximum number of citizens. It has no effect on inflation. It simply prevents larger and more powerful entities from using unfair practices to put weaker competitors out of business.
Competition in the industry is always intense. The number of supermarket outlets is increasing, as is the number of international operators. There is no evidence to suggest that supermarkets are enjoying artificially high profits.
If the ban on below-cost selling were abolished, how would this benefit consumers or lower the rate of inflation, as Mr McManus claims? Supermarkets can sell at cost now, but rarely do. It is very unusual to see fresh meat or vegetables at prices below cost (unless they are being cleared) even though the order permits this now. Why is this so? It is because supermarkets need to sustain their existing overall margins and will engage in below-cost selling only if they believe they can gain a permanent and profitable market advantage - in other words, if they can seriously weaken competitors or force them out of the market.
If the order is not renewed the principle beneficiaries will be the major multiple companies at the expense of independent retailers and symbol groups. Choice will be reduced and ultimately the consumer will suffer.
The Groceries Order promotes competition in the long run. It does not fuel inflation. It fosters a healthy and dynamic food retailing industry in this country by setting parameters in a notoriously turbulent industry that affects the lives of a great many people. - Yours, etc.,
Colin Jephson, Grange Park Crescent, Waterford.