Edited by John Raymond LaBrosse, Rodrigo Olivares-Caminal and Dalvinder Singh
Chapter 11: Firm Stability and System Stability: The Regulatory Delusion
1 Geoffrey Wood with Ali Kabiri 11.1. INTRODUCTION When the regulators examine the grocery business in the UK they are invariably concerned with competition. Is one firm or another too dominant? Is it treating customers appropriately? How is it treating its suppliers and its small competitors? In short, is the industry competitive is always, in one form or another, the question that is being asked. Concern is often prompted by the (entirely inappropriate) test of market share. A question that is never asked is how robust a particular individual firm is. This is distinctly odd to anyone familiar with regulation in the financial sector. In the UK, a question that is always in regulators’ minds is how stable a particular firm is. Why is that not asked of firms in the grocery sector? Banking services are important, but so, after all, is the supply of food. Yet the regulators never worry about what would happen if, to take a wildly implausible example, Tesco were to fail overnight. Why is that question not asked? The answer is surely in two parts. First, and very important for the failing firm’s suppliers and employees, there is for such firms a well-established and well-tested insolvency regime. That regime has for many years worked well in the sense of enabling orderly winding up or selling on of insolvent businesses, and has done so within a time period which in most cases has no doubt been irritating but seldom literally intolerable. Second, there is no fear...
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