The Competition Commission has demanded that large supermarket chains cannot dominate local areas and has proposed a new system to the government, angering Tesco in the process.
The competition watchdog has formally recommended a test that would make it harder for dominant supermarkets to open new stores through tougher planning hurdles.
The proposed test would prevent supermarkets that already have a strong presence in an area from adding to their current outlets in a bid to allow smaller grocers to open and improve choice.
The commission said this morning that extensions to existing stores of up to 300sqm (3,200sqft) would be allowed, unless the store had been extended in the last five years.
Under the test, the Office of Fair Trading will work with the UK planning authorities on the potential impact of any new development.
Where there are three or fewer grocers in the area, a retailer’s application will be approved as long as it does not then account for more than 60 per cent of total retail space.
If a retailer is new to the area, or if four or more different supermarkets are within a 10-minute drive of the proposed site, then they will pass the test.
The commission amended its plan to take into account Tesco's objections to the impact it would have on extensions of existing stores, but the supermarket giant branded the test a penalty for success.
In March, the retailer won an appeal at the Competition Appeals Tribunal after it argued the commission had not properly considered the outcomes of the test and objected to possible problems in creating store extensions in areas where new space was unavailable for rivals.
The Competition Commission completed a two-year investigation in April before the planning test, which Tesco immediately opposed, was proposed.
Tesco said that the commission had made the "wrong recommendation" and the test would act as a "brake on growth".
Lucy Neville-Rolfe, Tesco executive director of corporate and legal affairs, said the Competition Commission has made the wrong recommendation in this small but important aspect of its wider investigation into the sector.
She said: "The government should think very carefully before proceeding with this recommendation and intervening aggressively in what is acknowledged to be a highly competitive industry and deterring investment in these difficult economic times."
Peter Freeman, chairman of the Competition Commission, said: “We expect that the competition test will have the effect we intend by helping to bring in competition where it is lacking and to stop individual retailers consolidating strong positions in local areas to the detriment of consumers.
“Our detailed analysis has shown that the competition test is likely to have a positive effect for consumers by ensuring that they benefit from greater competition and choice between retailers both in their local areas and across the UK."
John Breach, chairman of the British Independent Fruit Growers' Association, said: “While we realise that supermarkets are here to stay, we would like to point out to anyone who might think that large supermarket chains are a good idea and should be allowed to continue growing unfettered, that such growth could also pose a major threat to food security and the environment.
“Thirty years or so ago, the market was in balance, with most towns having a mix of small grocers and a wide range of independent specialist retailers. Unfortunately, various authorities seemed to encourage the development of large multiple chains which have now grown to such an extent that they have overshadowed and starved many smaller enterprises.”
No comments yet