Supermarket Acquisitions (Tyne and Wear)

Mark Prisk Excerpts

Monday 7th February 2011 Commons Chamber

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

Let me begin by congratulating the hon. Member for Blaydon (Mr Anderson) on securing the debate. I am replying on behalf of the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), who sadly is unable to attend.

The hon. Gentleman rightly set out his concerns about the way in which competition policy set at a national level can have a genuine impact on local high streets and their communities. His concerns and those of his constituents have been heightened by the fact that not just one store but two are involved in this problem. Birtley had already lost its local Somerfield store, which closed back in the spring of 2009 following, as he said, the acquisition by Morrisons. I gather that recently there have been more positive discussions about that site, and I will turn to that in a moment. Nevertheless, I entirely understand that local people and local small businesses will have felt that their town is suffering. He described that very well and put across his constituents’ concerns accurately and vigorously.

Open competition is good for the economy and for consumers. At the same time, however, arms of government, at whatever level, have a responsibility to take careful note of the effects of their policies, and how they consult, on local communities. It is not just a question of a simple national identity. The hon. Gentleman accurately parodied some of the nonsense that occurs in some official documents, which does not relate to most people’s real-world existence. I certainly understand that the loss of a local supermarket greatly affects a local town and community. Clearly, it will mean that that community attracts fewer customers, and that is bad for the small shops and for the other traders. It can also be a problem, as the hon. Gentleman accurately described, for older people who do not have their own form of transport. For them it means that they have to travel further just to get the basics, and the costs rise on each occasion.

To establish the facts in this instance, my officials have been in direct contact with the Office of Fair Trading. The OFT’s role is to examine and adjudicate on mergers to ensure that they do not substantially reduce competition, which would harm the ability of consumers to shop around. That is an important role. It, together with the Competition Commission, which investigates mergers that have prompted concern, is of course fully independent. I should emphasise that Ministers can play no role in this whatsoever and have no powers to make any decision where a live case is in hand. That is probably right, because otherwise there is a danger that decisions will not be based on the evidence or will not necessarily be perceived as being free from political interference.

On this particular case, Asda announced in 2010 that it had struck a deal to acquire 194 Netto stores in this country. The OFT then acted on its legal duty to investigate the proposed merger. In September 2010, as the hon. Gentleman pointed out, the OFT announced its findings—that in 47 areas, Netto was the main competition to Asda and that in those areas consumers’ interests would be harmed by the proposed merger. As a result of that, the OFT has a legal duty to refer the merger to the Competition Commission for a full six-month investigation unless a solution can be found. But in this case, Asda has offered to sell the Netto stores in those 47 areas, including the one in Birtley. It is true that Asda does not need to have found a buyer before the OFT will accept that undertaking, but—this is in direct answer to one of the points that the hon. Gentleman raised—it is legally obliged to keep the Netto store open until a purchaser is found. Any purchaser must also convince the OFT that it will operate a grocery retail shop capable of mounting local competition, and Asda must ensure that it makes real efforts to ensure that workers will keep their jobs afterwards. Those matters relate to the substance of the issue with regard to the OFT and Asda. I hope that that provides the hon. Gentleman and his constituents with some reassurance.

The hon. Gentleman rightly went on to question how the consultation process really worked. The OFT has advised me that it did indeed commission a research company to survey about 12,000 Asda and Netto shoppers throughout the UK, and it tells me that that included Birtley. However, the House will have noted, you will have noted, Mr Speaker, and I have noted that that is not the experience of the hon. Gentleman. I trust that the OFT will have noted that that is his view. When we get into some of the complex language and processes that often deter people from being able to get involved in these surveys, it is important that officials, at whatever level, understand the need to check not only that they have followed due process but that they have thought carefully about whether what they are doing has been explained carefully to the people they are affecting. I trust that that will be made clear to the officials involved.

[Mr Anderson]

I was in no way having a go at the OFT, but this matter is of serious importance in Birtley. People in Birtley may well have been surveyed, but what information were they given when that happened? Things would have been different had they been told that the store might not reopen. That is the key issue. That is why I said that perhaps we could discuss whether there is a different way of doing things that is in everybody’s interests.

[Mr Prisk]

Absolutely; that leads to the point that I was about to come to. I understand that the OFT is now talking to the hon. Gentleman, which is good. However, he is right to say that we should always be prepared to listen and learn on these issues. That is why I am pleased to tell him and the House that the Government are preparing to look carefully and consult broadly and thoroughly to improve the efficiency of the regime and the robustness of the decision making. I hope that the hon. Gentleman will ensure that his views are known, and I am sure that he will. This instance is a good one, from which all of us can listen and learn.

I will briefly record Morrisons’ acquisition of 38 stores from the Co-operative Group in 2009, which included Somerfield stores such as the one in Birtley. Based on the representations I have received from Morrisons, I understand that the company took ownership of the site in April 2009. As the hon. Gentleman pointed out, it undertook a review after the purchase of the store’s commercial potential. Three months later, Morrisons concluded that the store was not viable as a Morrisons-branded outlet. Instead, it decided to seek a purchaser or tenant for the store, and it was marketed for sale or to let in July 2009.

In August 2010, with the property still on the market, Morrisons reached an agreement with Gateshead council to market the store jointly with the council’s land to the rear of the site as a combined development opportunity. In October 2010, the joint site was advertised in the press. I believe that it is still being marketed, either for sale or to let. Encouragingly, I understand that that has recently led to a number of offers, including from other food retailers. Morrisons and Gateshead council are now considering the feasibility of those bids. The company has reasserted its commitment to work not only with the council, but with the hon. Gentleman to find a viable solution. I hope that that progresses well and that it will be felt that the town centre has a more positive future than has been the case over the past 18 months.

We all recognise that there have to be strong rules over free and fair competition. That is the role of the OFT and the Competition Commission. However, as this debate has shown, central Government agencies must have clear regard to the impact that that policy has on local high streets and local people. The hon. Gentleman has rightly raised the concerns of his constituents about the effect on Birtley. I restate that Asda is legally obliged to keep the Netto store open until a buyer is found, and that purchaser must convince the OFT that it will operate a grocery outlet capable of competing with neighbouring stores. Although I appreciate that the situation is far from perfect, I hope that those two statements from the OFT will give some comfort to the hon. Gentleman and his constituents, whom he has so ably represented this evening.

Question put and agreed to.