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The competition test for grocery retailers would bring lasting benefits for consumers, the Competition Commission (CC) has provisionally concluded in a report today.
The commission has been carrying out further analysis on the benefits and costs of the test as ordered by the Competition Appeal Tribunal (CAT) after Tesco successfully appealed over the proposal in March this year.
The test would block supermarket developments by retailers already powerful in a local area to make room for competing stores from rival retailers.
Peter Freeman, Chairman of the CC and Chairman of the Groceries Inquiry Group, said: "What we were asked to do by the tribunal was to prove the case for the competition test and show that it would have the intended effect — to help bring in competition where it is lacking and to stop individual retailers consolidating their position in local areas to the detriment of consumers.
"Our detailed analysis has shown that the test 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," he said.
The commission's report into the UK groceries market, published in April 2008, concluded that action was needed to improve competition in a number of local markets, and so included a recommendation for the inclusion of a competition test in planning decisions on larger grocery stores.
But Tesco appealed to the CAT, which ruled that the commission had not properly assessed the economic costs of the test, and that it had failed sufficiently to address its proportionality and effectiveness.
The tribunal did not dispute the justification for the test itself and remitted the matter back to the commission for further consideration.
The commission's latest analysis estimated the benefits to consumers that would result from increased competition, with retailers already powerful in a local area no longer being able to shut out rivals from those areas and with the test also stopping areas from being dominated by individual retailers in the first place.
The analysis compared these benefits against the costs from any delay between a dominant retailer’s development being blocked and a rival’s alternative taking its place. It concluded that over the longer term, the benefits to consumers would outweigh any such initial costs.
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.
For further details on the Groceries report, see: http://www.competition-commission.org.uk/press_rel/2008/apr/pdf/14-08.pdf.
