OFT clears Tesco takeover of Cullens convenience store chain

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The Independent Online

The Office of Fair Trading yesterday dismayed convenience store owners by ignoring their pleas for it to clamp down on supermarket chains swallowing corner shop groups and clearing Tesco's acquisition of 45 small sites in central London.

The watchdog dismissed calls for it to refer Tesco's £54m purchase of the former Cullens, Europa Foods and Harts the Grocer stores for a full Competition Commission inquiry, despite admitting that the deal would create "a relevant merger situation".

As Britain's biggest retailer, which takes £1 in every £8 spent on the high street, Tesco's 27 per cent share of the food retail market is above the 25 per cent threshold that normally sets the OFT's alarm bells ringing. But after investigating the proposed deal, the watchdog found that it did not "give rise to competition concerns" at either the national, regional or local level.

David Rae, who represents 31,500 neighbourhood stores as the head of the Association of Corner Shops, urged Patricia Hewitt, the Secretary of State for Trade and Industry, to intervene to impose "competitive safeguards" to help small retailers fight the might of the supermarket majors. "We are disappointed that our concerns have been overlooked. This decision indicates that the OFT feels unable or unwilling to address the wider implications of the acquisitions it considers."

Bill Grimsey, the chief executive of Iceland's owner, the Big Food Group, echoed this view. "I think the OFT has failed to do its job. If consumers in the UK want to have a choice between Tesco, Tesco or Tesco in five to 10 years' time then that decision is good. But if people don't want to be dictated to as to where they shop then [the deal] should at least have been referred for an inquiry," he said.

Tesco plans to convert the 45 stores it agreed to buy from the privately owned Adminstore group to its smallest Tesco Express format. The sites are located in some of London's plushest neighbourhoods such as Chelsea, Kensington and Holland Park. "Customers like Tesco Express, and this deal will bring that shopping experience to more neighbourhoods," a Tesco spokeswoman said. The group, which raised a £1.6bn war chest to fund its ambitious expansion plans in January, is seeking to quadruple its current Tesco Express estate to 1,000 stores as part of its aim to increase its total share of the UK's retail market.

The ACS intends to continue lobbying the OFT in an attempt to force it to re-examine its decision that the market for "one-stop" shopping in superstores is distinct from "top-up" shopping in corner shops, favoured by today's harassed commuters.

Tesco, which has a 6 per cent share of the convenience store market, launched its assault on the sector in 2002, with its £520m purchase of T&S - a deal that the OFT also waved through.