OFT closes “hub & spoke” investigation of grocery retailers and suppliers
The Office of Fair Trading announced on its website last night that it has closed its investigation into suspected price coordination involving UK grocery suppliers and retailers.
The OFT had been examining possible indirect retail price coordination, so called “hub & spoke” information exchanges, across a range of products and involving a number of retailers and suppliers. Typically, hub & spoke exchanges occur when future pricing or other commercially sensitive information is passed between competitors via a mutual supplier in a tripartite arrangement. It is also known as an A-B-C information exchange, where, say, retailer A passes information to supplier B, in order for supplier B subsequently to pass this information on to retailer C to help set prices. Hub & spoke has proved a major compliance issue for the consumer products and other industries.
This investigation, believed to be one of the largest in the OFT’s history, was formally opened in April 2008 and has involved the OFT in a long-running review of the very considerable amount of material collected.
The OFT has now decided it is appropriate to close the investigation on “administrative priorities grounds”.
It has emphasised that there is no implication that any party was acting illegally and has given the following considerations as relevant to its case closure conclusion:
- the apparent positive influence of competition compliance initiatives across the sector;
- the OFT’s previous and ongoing competition enforcement involving indirect information exchange; and
- the resource implications of pursuing the investigation.
Although the OFT has reiterated its commitment to enforcement of the rules in the hub & spoke context, it is notable that the OFT has not taken an infringement decision on this since the concept was introduced in two 2003 investigations (of the childrens’ toys and replica football kit markets). Many observers had felt that the 2008 investigation could lead to the introduction of more detailed rules on hub & spoke arrangements. Such rules, however, have yet to be clarified.
