Business View: Safeway interfered with by Vickers: can competition survive?

It's been a grim week for competition policy. No sooner had the Office of Fair Trading made its clearly flawed ruling on the bids for Safeway than its director-general, John Vickers, was slapped down by the Trade Secretary over its plans to shake up the drug retailing market.

Patricia Hewitt will explain in detail this week why she decided it was not a good idea to allow the supermarkets to take all the business from the local chemists. It seems Mr Vickers, an economist by training, thought that market forces would improve competition. The politicians disagreed.

But it is worse for Mr Vickers. This was the first investigation into a market conducted by the OFT, using the licence that this administration has given it to be a consumer champion. How well does this augur for the next probe?

Meanwhile, the decision to refer all but Philip Green's bid for Safeway to the Competition Commission has left everyone, but the colourful-speaking Arcadia owner, dazed and confused. Asda, Tesco and J Sainsbury were always going to be knocked back, but Wm Morrison must have felt it had a good chance of being allowed to bid unchecked.

We get the full details of the OFT's reasoning in a few days. But it is unlikely to make good reading. The OFT said local monopolies would be created by Morrisons buying Safeway, but it could not measure them, so it could not suggest actions to get rid of them. It does make you wonder what we are paying the OFT millions to do.

But the suppliers, who want Morrisons to win, are getting fretful. Mr Green is known more for squeezing suppliers than for growing businesses. The farmers' pleas to the OFT fell on deaf ears.

However, things might not be as bad as they seem. Mr Green will not bid until he has seen the OFT's reasons for referring all the other bids, and Safeway's trading statement, due in the next couple of weeks. That also will not make good reading, as morale in the company is lower than a snake's belly.

The OFT has dealt Morrisons a cruel blow which the Competition Commission will repair. Mr Green is after a bargain and Morrisons is after a transforming transaction. The price it will be willing to pay is worth waiting for.

Rough trade on Wall Street

Another securities firm closed in the City last week but on Wall Street it is champagne time. Astounding figures from Bear Stearns were followed by stonkers from Goldman Sachs, Morgan Stanley and Lehman Brothers. How come? No one's been bidding for anyone. No one has been floating. And the markets, despite the recent rally, are 40 per cent off their peaks.

The answer is bond, currency and commodity trading, much of it for the investment banks' own accounts. These guys have been betting their balance sheet on a daily basis, fuelling volatility and benefiting from it.

Is it good for world capitalism? Probably not. Is it good for the firms? Not in the long term. The way investment banks are set up, if you make a big profit you have to give a pretty big share of it to your star traders or else they walk away. If you make a big loss, it's all yours.

Proprietary trading undermined Salomon Brothers, Bankers Trust, SG Warburg and a host of other venerable names that are now part of something more solid. As they used to say on Hill Street Blues: "Be careful out there."

British Biotech adds up to nowt

You do not have to be that old to remember when British Biotech was worth more than £2bn and was a member of the FTSE 100. But the odd whistle-blower intervened and the Great White Hope of the British biotechnology industry fell rapidly from grace.

On Friday it announced it was on the comeback trail with the purchase of a privately owned rival, RiboTargets. Peter Fellner, who runs British Biotech, called it the first shot in the war to consolidate this diffuse industry.

But hold on. The deal will create a company with £43.5m of cash and £7.9m of receivables, and free up an attractive freehold property in Oxford that the new group will probably sell for upward of £2m. This is pretty much the same as the market value of the new company.

In other words, the intellectual property of this once great beacon of British inventiveness is valued at nowt.

j.nisse@independent.co.uk