Food (Promotion and Placement) (Scotland) Regulations 2025: business and regulatory impact assessment

7. Competition Assessment

In addition to looking at the impact on individual firms, consideration is given to the impact that a measure^[52] may have on competition between firms. The overall aim of the competition assessment is to find a policy approach which encourages competition within the market subject to achieving the wider policy objectives.

In terms of restrictions on HFSS promotions and business within scope of regulations the Scottish Government is aligning with the approach taken by the UK Government and Welsh Government. In 2024, there were an estimated 5,500 retailers potentially within the scope of the regulations. Of these 5,400, or 98%, were micro or small enterprises with fewer than 50 employees.^[53]

The vast majority of sales occurs in medium and large businesses, reflecting the dominance of supermarkets in the grocery sector. Of a total turnover of around £16.5 billion in the food and drink retail sector potentially within scope in 2024, almost £14.2 billion, or 86% was in businesses with 50 employees or more.^[54]

To assess the impact the policy may have on competition between firms the following questions are considered as detailed below:

Competition checklist

Will the measure directly limit the number or range of suppliers?

Policy Measure

Price restrictions: No. The regulations will place no direct limit on the number of retailers which can operate in the market.

Location restrictions: No. The regulations will place no direct limit on the number of retailers which can operate in the market.

Competition checklist

Will the measure indirectly limit the number or range of suppliers?

Policy Measure

Price restrictions: Manufacturers of targeted food and drink products will be impacted through reduced sales as the policy seeks to restrict the promotion of new and existing HFSS product lines.

The measure does not seek to limit the number or range of suppliers in the market. Instead, it may encourage manufacturer reformulation to non-HFSS products in order to access promotion types that aren’t restricted.

Suppliers producing HFSS food and drink will still be able to compete on absolute price level, quality and taste which will limit the impact on competition.

There are potential non-intended incentives for retailers at the margin of the size exemption rules (i.e. around 50 employees or a premises around 2000 square feet) to either lower the size of their business, in terms of employment and/or physical store size, or alternatively for those currently within the exemption limits not increase the size of their business in order to remain exempted. However, it is unlikely this would represent a large share of businesses, and meeting the HFSS requirements would only be one of many factors which determine a business’ growth strategy and/or store sizing.

Location restrictions: Exemptions on restrictions are provided for micro or small business (businesses with under 50 employees) and on location restrictions for premises smaller than 2000 square feet.

As per modelling it is assumed business premises reconfigure costs are likely to be minimal and non-prohibitive for business in scope.

There are potential non-intended incentives for retailers at the margin of the size exemption rules (i.e. around 50 employees or a premises around 2000 square feet) to either lower the size of their business, in terms of employment and/or physical store size, or alternatively for those currently within the exemption limits not increase the size of their business in order to remain exempted. However, it is unlikely this would represent a large share of businesses, and meeting the HFSS requirements would only be one of many factors which determine a business’ growth strategy and/or store sizing.

Competition checklist

Will the measure limit the ability of suppliers to compete?

Policy Measure

Price restrictions: The measure does not limit businesses ability to compete on grounds of quality, geographic location, absolute price, advertisement and many other aspects on which businesses frequently compete.

Price promotions are a method of competition, which will be restricted under the regulations.

In engagement with businesses, there were suggestions that the proposals may impact negatively on the ability of retailers to compete with out of home providers due to only pre-packed foods being targeted, and on the ability of manufacturers of HFSS branded products to compete with supermarket own HFSS brand offerings and the impact this may have on new brands entering the market.

This method of competition will be restricted for HFSS products only. It is likely that firms will adapt to compete on absolute price level instead.

Location restrictions: The regulations do not limit businesses ability to compete on grounds of quality, geographic location, absolute price, advertisement and many other aspects on which businesses frequently compete.

Businesses will likely respond by placing alternative products in the areas of store restricted under this policy proposal.

Manufacturers bringing new HFSS products to market may traditionally use product placement to penetrate a market. This measure may disadvantage the launch of new HFSS product lines and potentially encourage manufacturers towards launching non-HFSS products.

Competition checklist

Will the measure limit suppliers’ incentives to compete vigorously?

Policy Measure

Price restrictions: Measures do not exempt suppliers from general competition law, introduce or amend the intellectual property regime or increase the costs to customers of switching between suppliers.

This policy does restrict businesses in their ability to offer promotional prices on targeted food and drink that is HFSS which will limit the pricing strategies available to suppliers and may impact on the potential for innovative pricing strategies on HFSS products. This would apply to all suppliers operating in the market.

This may lead to more transparent pricing in the form of everyday low pricing which allows consumers to make a fair comparison between products based on price / value instead of trying to navigate a variety of different promotional pricing strategies.

The measure would not limit suppliers incentives or ability to compete vigorously on non-targeted food and drink.

Location restrictions: The proposal does not exempt suppliers from general competition law, introduce or amend the intellectual property regime or increase the costs to customers of switching between suppliers.

Competition checklist

Will the measure limit the choices and information available to consumers?

Policy Measure

Price restrictions: These measures would not limit the choices or information available to consumers. No food or drink is being banned.

Proposed restrictions will not limit the range of options available to consumers. The measure will however limit how targeted HFSS products can be promoted.

Location restrictions: Measures would not limit the choices or information available to consumers, given that restrictions are on where products can be displayed rather than restrictions on the sale of items.