Competition watchdog may get power to veto supermarket expansion plans

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The Independent Online

The leading supermarket chains are expected to escape largely unscathed when the Competition Commission publishes its long-awaited report into the industry later this month.

The leading supermarket chains are expected to escape largely unscathed when the Competition Commission publishes its long-awaited report into the industry later this month.

It is understood that the central recommendation of the report is that the big five firms - Tesco, Asda, J Sainsbury, Safeway and William Morrison - should be forced to obtain the approval of the Office of Fair Trading before building new superstores.

Although the report is thought to identify a number of concerns about the companies' large market shares and predatory pricing policies, the commission is expected to stop short of recommending any specific remedies, finding that the market is "generally competitive".

Kevin Hawkins, a spokesman for the fourth-ranked operator, Safeway, said: "It looks like it's a thumping verdict of 'Not Guilty' ... Basically, they have found nothing contrary to the public interest."

He welcomed the proposal that John Vickers, the new director-general of the Office of Fair Trading, should investigate all requests to build a new supermarket of more than 1,000 square metres within a 15-minute drive of one of their existing outlets. Mr Hawkins said: "It might be a help to ourselves and some of the smaller retailers."

But his enthusiasm was not shared by some of Safeway's larger rivals. A spokesman for Asda said: "If this means that there will be a complete overhaul of planning regulations, then we will remain open-minded. But if this is just another hoop that we have to jump through, then it could be costly and time-consuming."

The recommendation, if implemented, is likely to have the most damaging effect on Tesco, the biggest operator, which commands a market share of more than 50 per cent in some areas.

However, Safeway would be affected in Scotland, where it has a large market share, while William Morrison and Asda would feel the effects in northern England because of their stronger presence.

A Tesco official said the group "worked closely" with local planning authorities when planning store openings. Asked whether he regarded the proposals as unnecessary, he replied: "Yes, we would say that."

The 16-month inquiry into the growing power of supermarket groups is thought to have found that the biggest companies are threatening small grocers and limiting consumer choice by selling some essential goods at below cost prices. But the competition body is said to have ruled out as "unworkable" measures such as forcinggroups to shed some of their outlets and demanding that they publish up-to-date price lists on the internet.

Safeway's Mr Hawkins said: "We have been accused in the past of making excessive profits. Now we're being criticised for selling below cost - you can't have it both ways."

The Tesco spokesman said: "Many shoppers not only like to buy their food at reasonable prices, but find it a necessity. Without supermarkets, that wouldn't happen."

The publication of the findings will remove a shroud of uncertainty from the sector, and may spark a wave of consolidation. Safeway is seen as the most likely to be swallowed by a competitor, with Asda and Morrison potential buyers.

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