Chains will not be unable to build in areas where they have a monopoly of stores under new recommendations

Supermarkets chains should not be able to build in areas where they already have a large presence, the Competition Commission has announced today.

Supermarkets to face 'competition tests' on new developments

It recommended that supermarkest pass a 'competion test' before being allowed to build. This is one of the recommendations made by the CC in the final report of its two year groceries market investigation.

The Commission also announced that it will require the "big four" grocery retailers (Tesco, Sainsburys, Morrisons and Asda) to lift restrictions on other supermarkets building on land they are selling.

It has called for the release of 30 restrictive covenants that it has identified as blocking competition. These agreements involve the chains buying sites and then selling them on with the proviso that the new owners do not allow one of their competitors to use the site.

Overall, the report judged that consumers are getting a good deal from grocery retailers. However, it also argued that competition must be improved in local areas. To this effect it recommended that the Office of Fair Trading should advise Local Planning Authorities on whether a chain has passed a “competition test” before granting it planning permission to open a new store.

Applicants would pass the test if:

  • They are a new entrant to the area bounded by a 10 minute drive from the development site
  • Total number of supermarket chains operating in the area was four or more (including applicant).
  • Total number of chains is three or fewer and the applicant would operate less than 60% of grocery sales, including the new store.

Peter Freeman, chairman of the competition commission, said: “Although, in many areas, there is a good choice and strong competition between retailers, there are also a significant number of local areas where larger grocery stores face limited competition and local shoppers lose out.”

The Campaign to Protect Rural England criticised the report for not going far enough saying the Commission was “narrowly focused on competition between the big retail giants”. CPRE campaigner Graeme Willis said: “It looks set to do nothing for the small shops and independents being squeezed out of the market by the big four.”

Many of the report’s recommendations were originally flagged up in its provisional recommendation of remedies, published in February.

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