Vertical market relations in the UK grocery trade: analysis and Government policy

The article examines trends in the market power relationship between UK grocery manufacturers and retailers over the past 10‐15 years. It identifies the underlying causes of trends in this area, the implications for consumer welfare, and the legislative framework relating to these relations. Contributory factors to the changed market‐power relationship are relative manufacturer and retailer firm size and market share, individual manufacturing firm market dependence upon particular retailers, information technology, private label merchandise and product development activities, logistics arrangements and other vertical links between manufacturers and retailers. Aspects of welfare economics are examined as a basis for assessing consumer outcomes in this area, and past and present government legislation in the matter is considered, together with some reference to international comparisons. A case is made for some further strengthening of the relevant legislation in the UK.