Convenience retailers are urging the government to adopt the Competition Commission (CC)’s recommendation for a competition test in retail planning applications, which would limit the power of supermarkets to open new stores in areas where they are already dominant.
The test would prevent retailers with more than 60% share of a local market from expanding their dominance through building new stores. It was put forward as a recommendation in the Grocery Market Inquiry last year, but an appeal by Tesco to the Competition Appeal Tribunal forced the CC to reconsider its proposal.
However CC chairman Peter Freeman said last week that the Commission believed the test would be “effective, beneficial to consumers and proportionate.”
“Our 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,” he added.
The CC modified its proposal to allow one extension of up to 1000sq ft of a store’s grocery sales area in a five year period. It said this woud “not significantly reduce the effectiveness of the test.”
Convenience retailers’ representatives called for government to adopt the test. ”Now the commission has made its recommendation the government have to deliver,” said ACS (Association of Convenience Stores) chief executive James Lowman.
However the test is more likely to benefit Tesco’s national rivals, particularly Asda, than local businesses.
“We believe that the test can play a role in ensuring more competition in the grocery market,” said Lowman. “However this measure is not a panacea for the competition failings of a market dominated by a handful of major supermarkets.”
Government now has 90 days to respond to the Commission.