There is clear evidence that the UK supermarket sector is increasingly dominated by a few firms, led by Tesco, Sainsbury and ASDA. The supermarket sector is oligopolistic and the pricing strategy of supermarkets can be understood using game theory approach.
It is also accepted that many farmers and growers are suffering as a result of the increasing monopsony power of the major supermarkets.
The pace of concentration accelerated until the 2012, but since then the rise of the low-cost retailers Aldi and Lidl has halted the rise of the big four, and reduced the 4-firm concentration ratio to 62.3% (from 75% in 2011).
Tesco was prevented by the OFT from purchasing Safeway in 2002, but was allowed to buy 1200 ‘convenience’ stores. By 2005, Tesco had acquired nearly 6% of the convenience food market.
The rise of the large supermarket chains has, unsurprisingly, coincided with the decline in independent high street retailers.
Over the last 5 years the number of independent retailers has fallen by a third, from 35,000 to 25,000.