Tesco Price Hike by Stealth - 24/03/2010

The Times reports that One Stop, the convenience store chain owned by Tesco, charges 14% more for goods than the "Tesco" supermarkets. This flies in the face of Tesco's boast that it charges exactly the same prices everywhere regardless of local competition. Furthermore this claim to be completely even-handed with its pricing is the very argument Tesco put forward to resist curbs on its expansion, causing the Competition Commission to decide that the big four grocery retailers - Tesco in particular - generally obtain lower prices. The Competition Commission then turned its eyes solely on larger stores choosing not to consider the grocery retailers.

When Tesco acquired the One Stop chain it re-branded roughly half the outlets as Tesco Express and kept the branding for the remaining stores as One Stop. Approximately 38% of One Stop stores happen to be situated in poorer areas and are subject to far less competition. Hilary Shaw, an expert in food is economics, commented that the strategy Tesco employs with the One Stop brand is creating a vicious circle of under provision of healthy affordable food in poorer areas.

Tesco airily told the Competition Commission that... "We sell all our products on the basis of a national price list available for all to see on our website. It is not our policy to vary prices by reference to location. Our Express stores are on a separate national price list under which they sell products at an average of 2%-3% higher than our other stores because of higher costs"

All this would be fine if Tesco hadn't more or less air-brushed One Stop out of most of its communications only briefly mentioning its "Cinderella" company in its company report, as it legally has to. It is not mentioned on the Tesco website and it has not been mentioned in any communication aimed at the stock market since 2005. One Stop also appeared to slip Tesco's mind when compiling a submission for the Competition Commission inquiry; a separate submission for One Stop was provided despite a requirement by the Competition Commission framework to consider all brands owned by the same holding company as one.

This is precisely the type of situation that TMA Legal's Competition Law Lab has been set up to address. Big powerful companies seem to think that they can flout the rules as they do not apply to them, relying on the belief that small companies do not have deep enough pockets to take them on. However with the changes to the way class actions can be tackled may mean the big boys may be forced to think again.

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