Competitive Supermarket 'Test' Urged

The Competition Commission has recommended a "competition test" to stop supermarkets dominating in a local area.

The test would prevent supermarkets' groceries developments, including extensions to existing stores, by retailers with a strong presence in a local area, to make competing developments from rival retailers easier.

The watchdog published its provisional decision in July and, after considering responses to that document from retailers and other parties, has now made its final decision.

Peter Freeman, Chairman of the CC and Chairman of the Groceries Inquiry Group, 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. We were asked to look at the case again by the Tribunal—and we believe we have shown the test will be effective, beneficial to consumers and proportionate.

"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.

"We have, however, provided an exception for small extensions to the groceries part of stores, provided those stores have not been extended in the previous five years."

The CC’s final report into the UK groceries market, published in April last year, concluded that action was needed to improve competition in a number of local markets and so included a recommendation for the inclusion of a competition test in planning decisions on larger grocery stores.

In March this year, an appeal by Tesco to the Tribunal against the competition test was upheld on two grounds—that the watchdog had not properly assessed the economic costs of the competition test and that it had failed sufficiently to address the competition test’s proportionality and effectiveness.

Although the Tribunal did not conclude that the competition test would necessarily be ineffective or unreasonable, it remitted the matter back to the CC for further consideration, particularly on the costs and benefits of the competition test.

The analysis carried out during the remittal process concluded that the benefits from the test would substantially outweigh any costs arising from it.

(GK/KMcA)