Tesco disputes competition test proposal

16th Jul 2009 08:12

Supermarket giant Tesco has voiced its opposition to a Competition Commission (CC) proposal that would block supermarket developments by retailers already powerful in a local area.The CC said today that a test to prevent this from happening 'is likely to have a positive effect over time for consumers by ensuring that they benefit from greater competition and choice between retailers in their local areas.'Today's statement comes after the Competition Appeal Tribunal asked the CC to revisit a report on competition issues published in April last year, following Tesco's appeal against the report's recommendation for the inclusion of a competition test in planning decisions on larger grocery stores.The test proposed by the CC means that for a store operator to open a new supermarket, within a 10 minute drive of the proposed site; the retailer would have to be a new entrant to that area; the total number of competing brands in that area would have to be at least four; or if the number of competitors was three or fewer the firm proposing opening a new store would have to operate less than 60% of grocery sales in the area (including the new store).The Tribunal upheld Tesco's appeal on the grounds that the CC had not properly assessed the economic costs of the test and that it had failed sufficiently to address the test's proportionality and effectiveness. The CC was supported by Tesco's rivals Asda and Waitrose and the Association of Convenience Stores.Having revisited the issue, the CC today said that it had balanced the benefits to consumers that would result from increased competition against the delays between a dominant retailer's development being blocked and a rival's alternative taking its place."The analysis concluded that over the longer term, the benefits to consumers would outweigh any such initial costs," the CC said.However, Tesco disputed this, saying that the CC had already found that competition in the UK groceries industry is effective on the whole."The main effect of the proposed test will be to deter extensions which will prevent many older stores being updated to provide a better offer for customers up and down the country," Tesco's corporate and legal affairs director Lucy Neville Rolfe said."We look forward to further discussions with the Commission before they publish their final decision."The CC is now inviting responses to the provisional decision by 29 July and will assess these before publishing its final decision by 5 October.