ABSTRACT
When the regulators examine the grocery business in the UK, they are invariably concerned with competition. Is one firm or another too dominant? Is it treating customers appropriately? How is it treating its suppliers and its small competitors? In short, ‘is the industry competitive?’ is always, in one form or another, the question that is being asked. Concern is often prompted by the (entirely inappropriate) test of market share. A question that is never asked is how robust a particular individual firm is. To anyone familiar with regulation in the financial sector, that is distinctly odd. A question always in regulators’ minds there is ‘how stable is the firm?’.2 Why is that not asked of firms in the grocery sector? Banking services are important but so, after all, is the supply of food. Yet the regulators never worry about what would happen if, to take a wildly implausible example, Tesco, the largest grocery chain in the UK, were to fail overnight. Why is that question not asked? The answer is surely in two parts. First, and very important for the failing firm’s suppliers and employees, there is for such firms a well-established and well-tested insolvency regime. That regime has for many years worked well in the sense of enabling orderly winding up or selling on of insolvent businesses and has done so within a time period which in most cases has no doubt been irritating but seldom literally intolerable. Second, there is no fear that a vacuum would be left by such insolvency. To continue with our example, if Tesco were to fail, far from there being a dearth of groceries, within hours, Sainsbury’s, Morrisons and the other main competitors would be fighting vigorously over this new market opportunity.
