Supermarkets cleared in profit probe

A year-long probe today cleared the "big five" supermarket chains of making excessive profits.

A year-long probe today cleared the "big five" supermarket chains of making excessive profits.

But the Competition Commission's detailed report urged them to agree to a new conduct code with suppliers and farmers.

While they operate in a broadly competitive way, they were still providing "distorted" competition in three key areas.

These were the relationship between supermarkets and farmers, persistent selling of goods below cost and a limited choice of supermarkets in some areas.

Supermarkets should set up a code of conduct with farmers and suppliers to put relations between them on a more "predictable" footing, the commission added.

The commission proposed larger supermarkets should have to seek the approval of the director general of the Office of Fair Trading before being allowed to acquire or develop large new stores close to their existing stores.

Trade and Industry Secretary Stephen Byers said: "I agree that a code of practice should be introduced.

"Like the commission I do not believe that a voluntary code would be adequate.

"The relevant supermarkets will have to give legally binding undertakings to comply with the remedies."/