The Competition Commission proposals in full

Tesco, Britain’s biggest supermarket group, last night attacked proposals from the Competition Commission that could curb its dominance of retailing in towns across the UK.

In its long-awaited report into competition in the £120 billion groceries sector, the competition watchdog recommended a new “competition test”, under which authorities would have to take account of how many outlets a supermarket already has in a particular area. If it is deemed that there are too many branches of Tesco in a given area, for example, the council could support an application from Asda instead.

The test, which could give shoppers a wider choice of supermarkets in their local areas, will apply to all grocery developments above 1,000 sq m and will be overseen by the Office of Fair Trading. Supermarkets could be forced to fund the change, the commission said.

Tesco, which dominates the market, has fiercely opposed such a move. Last night it condemned the proposed test as “a growth cap on successful retailers whose activities in this highly competitive market. . . benefit consumers.”

Lucy Neville-Rolfe, director of legal affairs, said that the proposals would introduce “additional bureaucracy, costs and delays, which we estimate at up to £150 million a year”.

The new test was part of a package of measures unveiled by the commission after a two-year inquiry into the market and the 75 per cent market dominance of the big four players – Tesco, Asda, Sainsbury’s and Morrisons.

Other measures included the creation of an independent ombudsman, or “shopping czar”, to oversee a strengthened code of practice for supermarkets and to arbitrate on disputes between them and their suppliers, and an end to so-called “restrictive covenants”, under which supermarkets seek to block rivals from entering an area by preventing them from snapping up land that they are selling.

However, the commission stopped short of recommending that retailers sell land or stores, as some supermarkets had feared that it would.

Charities and small retail groups complained that the measures were “too timid” and would do little to prevent the creation of “clone towns” and the gradual demise of diversity on the high street.

Sandra Bell, of Friends of the Earth, said: “Unless it [the competition test] is combined with strengthened planning rules to restrict supermarket expansion, it could simply mean that we get more big supermarkets being built next to each other.”

James Lowman, chief executive of the Association of Convenience Stores, said: “It is extremely disappointing that the proposed remedies are so timid. There is a very real problem in this market and the measures recommended go nowhere near far enough.”

The new code of practice will include all grocery retailers with a UK turnover greater than £1 billion. The commission’s findings will be consulted upon before the watchdog releases its final report at the end of April.

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