Business View: Snobbery is no justification for strangling Tesco

The retailer needs to be reined in, not punished for its own success
Click to follow

How do you solve a problem like Tesco?

The Competition Commission, which is 18 months into an investigation into supermarket dominance, last week said that it was worried that Tesco could grow until it got "into such as strong position, either nationally or locally, that no other retailer can compete effectively".

Tesco is used to dodging the brickbats. It has been accused of bullying suppliers, driving smaller independent stores out of business and using its financial muscle to buy up vast swaths of land which it may, or may not, use to build more superstores at a later date.

Environmentalists don't like Tesco because its customers jump into cars to visit its out-of-town stores, and because it allegedly ferries its produce needlessly from one end of the country to the other before it reaches the shelves.

Tesco-baiters include a burgeoning and affluent section of the middle class, who drive their Chelsea tractors to upmarket delis where they spend a fortune on small pots of olives, sun-dried tomatoes and other such gunk.

But to the surprise of many, the Competition Commission found little evidence that Tesco squeezes its suppliers or that it has used predatory pricing to drive local rivals out of business. This is despite the claim from the Association of Convenience Stores that 2,000 independent small local shops closed during the 12 months to June last year as supermarkets moved in.

Anyway, it is fashionable to see Tesco as the great Satan of retailing, the destroyer of high streets and devourer of babies. But the simple fact remains that the retailer is successful because it offers a service we find very attractive. We like Tesco, but hate to admit it.

For the sake of argument, imagine that Tesco were to announce tomorrow that it was to open a new store on a rural part of the north Norfolk coast. There would be vocal opposition from residents and businesses and it would be hard to imagine from all the noise that anyone would want to buy their groceries there.

But want to wager that the store would be anything less than successful? Thought not.

The same pattern is regularly repeated across the country - not just in the case of Tesco, but with Asda, Morrisons and Sainsbury's as well. So either protesters don't like Tesco and its ilk but can't resist the allure of the three-for-two offers when the store opens, or the majority of residents want to shop there. It is only a misplaced form of cultural snobbery to pretend otherwise.

Tesco is a successful and well run company. It is better than Sainsbury's, Morrisons and Asda at being a retailer. So it seems unjust that competition authorities should punish it for its ability to grow faster than its rivals.

But despite admiration for Tesco as a company, it cannot be allowed to grow unchecked. A careful reining in of Tesco's store-opening plans, taking into consideration specific local issues, seems an appropriate step, not least because consumers will benefit the most when the company is kept on its toes by hungry rivals.

Tesco must not be allowed to run amok, but it shouldn't be punished for being successful.

London leads the world

Accoona, a search engine company that has been compared with Google, is going to list in London and not New York, despite being headquartered a few blocks from Wall Street. This is the latest example, if any were needed, of how London has eclipsed New York as the financial capital of the world, and shows why Nasdaq so badly wants to get its hands on the LSE.