UK competition regulator stands by grocery competition test plans

Posted by Daniel Palmer on 17th July 2009

The UK’s competition watchdog has defended its proposal for a planning test for the country’s supermarkets despite fierce criticism from Tesco and questions from some industry watchers.The Competition Commission told just-food that the UK grocery sector was not “flawless” and that its plan for a “competition test” would boost competition and benefit consumers.

“We believe it is needed. Retailers have to work a bit harder when faced by their competitors,” a Commission spokesman said.

The test, which has been fiercely opposed by Tesco, the UK’s largest retailer, will seek to ensure no single company accounts for over 60% of grocery sales in a given area.

The Commission first argued in April 2008 that regulation was needed to improve competition between UK supermarkets but, after an appeal from Tesco, the regulator was forced by a tribunal to revisit its proposals.

A final verdict on the test is due in October. The Commission spokesman said the regulator would not have to present its new evidence to the tribunal but added that a further challenge to its plans could occur.

“Clearly somebody could challenge the report and take it to the Competition Appeal Tribunal,” the spokesman admitted.

Tesco said earlier that it would seek further talks with the Commission after labelling the test a “misguided proposal” based on “far-fetched assumptions”.

Neil Saunders, a retail analyst at Verdict Research, questioned the Commission’s methodology, arguing the regulator was basing its evidence on the belief that consumers shopped where they lived.

“People just don’t shop like that; they have access to lots of supermarkets,” Saunders argued, pointing to consumers looking to shop closer to their place of work, for example.

Saunders told just-food that the competition test would add a layer of bureaucracy and was “unnecessary” as the UK grocery sector was already competitive.

Saunders cited Tesco’s battles with the “deep discounters” of Aldi and Lidl as evidence that one retailer does not wield excessive power in the UK.

“The grocery market is in of the most competitive states it has been in. Consumers have it much better than when the market was more fragmented,” Saunders said.

The Competition Commission spokesman acknowledged that the UK grocery sector was competitive – as the regulator reported when it concluded its two-year enquiry into the market last April – but insisted that did not mean the industry was “flawless”.

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