UK's 'big four' supermarkets could expand further

More supermarkets could be opened in some areas of the UK under proposals outlined today by the UK's Competition Commission to help give shoppers more choice.

The competition watchdog has recommended a shake-up of the planning system as part of an 18-month inquiry into the supermarket sector, which could allow the “big four” supermarkets greater scope for expansion.

But UK grocery giants may also be forced to sell some of their prized landbanks after the Commission found supermarkets were stifling competition by stockpiling undeveloped land.

The provisional findings reveal that the UK lacks competition in the supermarket sector, with around 200 areas identified by the Commission as having particularly weak choices for consumers.

The Commission also found that of 520 landbank sites owned by supermarkets, more than a fifth were potentially being used specifically to hold back competition.

Around 10% of all large grocery stores in areas of poor competition controlled a nearby site of land which was acting as a barrier to competitors, according to the report.

The relationship between suppliers and supermarkets also came under scrutiny and tougher rules to protect suppliers may be on the cards.

However, the watchdog said it believed consumers were getting a “good deal” in general and effectively cleared supermarket giant Tesco of having a stranglehold on the sector.

The Commission said it found that Tesco – which has often come under fire over its dominance of the sector – was “not in such a strong position that other retailers cannot compete”.

It also said it had not uncovered any evidence of price fixing among supermarkets and found that small retailers were not being unfairly disadvantaged.

The Commission was slammed by small retailers for not clamping down hard enough on anti-competitive practices within the supermarket sector and potentially allowing the big four brands to further dominate grocery retailing.

The Federation of Small Businesses in England said retailers, shoppers and suppliers had been “let down” yet again by the Commission.

Planners also rounded on the watchdog, with the Royal Town Planning Institute saying the planning system overhaul proposed could end up “destroying our town centres”.

Peter Freeman, chairman of the Competition Commission and head of the inquiry group, denied the move was designed to pander to the needs of the big four supermarkets.

He said: “What we’re concerned about is the distortion that some aspects of the planning system creates in favour of incumbent retailers.”

“I’d be concerned if what we’re proposing was seen as a green light to green field development and to supermarkets to open new stores – it’s not.”

Proposals outlined in the report include reviewing the planning system to allow more developments on the edge of town centres, while maintaining constraints on out-of-town supermarkets.

A new “competition” test could be introduced to the planning system to replace the current “needs” test, according to the Commission.

A competition test would see local authorities encouraged to look favourably on retailers who do not have a presence in a local area, rather than the current system which requires supermarkets to demonstrate that a town requires a new store.

The Commission is also proposing changes to the voluntary code of practice governing the relationship between suppliers and grocers, which may see the rules extended to cover not just the big four supermarket chains.

It also recommends a change in how the code of practice is monitored, possibly paving the way for an independent ombudsman to oversee the supply chain relationship.

The National Farmers’ Union today said it was “delighted” at the suggestion of better protection for suppliers, adding that it was pleased the Commission had recognised that the current code was not working.

Shares in Tesco rose more than 3% as analysts said the report’s proposed measures were unlikely to be too harmful for retailers.

The chain said the Commission’s comments “lay to rest” claims that Tesco is abusing its power in the sector.

Morrisons, the fourth biggest chain in the UK, said the plans put forward today could see it “being represented in more localities”.

The Commission is not due to publish its final findings until next year, with the investigation timetable having been put back earlier this year.

The investigation is the third of its kind into competition in the supermarket sector in seven years after a market-wide inquiry in 2000 and an examination into the issues arising from a battle for Safeway three years later.