Supermarkets should face local 'competition test', says watchdog
Competition Commission urges tighter planning rules to stop grocery stores squeezing out rivals
Julia Finch, City editor , guardian.co.uk, Friday 2 October 2009 17.34 BST
Tesco, the UK's biggest retailer, is likely to be hardest hit by the competition test. It appealed against the Commission's initial recommendation earlier this year
Supermarkets could face a tough hurdle before they open a store following a formal recommendation from the competition watchdog that the government implement a new planning test.
The Competition Commission said it would "bring significant and lasting benefits for consumers" if its proposed new "competition test" was adopted.
The proposal – which would favour retailers not operating in a town when permission for a new supermarket is sought – came out of a two-year Competition Commission enquiry into the £130bn grocery business, which reported in November 2007. The move would prevent supermarkets with a strong presence in a particular area shutting out rivals by building more stores or extending existing outlets.
It was seen as an attack on so-called "Tesco towns" – areas where almost all the major food outlets are owned by the UK's biggest retailer – and Tesco launched an appeal against the new test at the Competition Appeals Tribunal.
The tribunal ruled that the Competition Commission had not done a thorough cost-benefit analysis of its proposed test and the watchdog was forced to carry out a more detailed study. In a new report in July, it said the new test would generate benefits of some £2bn for consumers over the next 25 years.
Peter Freeman, chairman of the Competition Commission, said the test would "bring in competition where it is lacking and stop individual retailers consolidating strong positions in local areas to the detriment of consumers."
Tesco, which has argued that the test constrains growth and will cost jobs, said it still believed the...