Planning rules favour Tesco, claim rival chains

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Tesco's biggest rivals have urged the Competition Commission to rip up the UK's planning rulebook, which they argue restricts local competition in the £120bn grocery sector.

In their submissions to the Government watchdog's probe, J Sainsbury, Asda, Wm Morrison and Marks & Spencer all lambasted the planning regime, which they believe favours Tesco, the country's biggest player.

Sainsbury's warned that Tesco's existing 34 per cent share of the superstore market could hit 43 per cent by 2010 unless tough action reins in its rival. It called for planning authorities to take local market share into account when granting permission for new stores to protect consumer choice.

In the most vehemently anti-Tesco submission from any of the top chains, Sainsbury's called for the market leader's landbank of undeveloped sites to be sold off. It said Tesco's high level of local market share in some areas "restricts consumer choice and creates the potential for future consumer harm". It said the situation was "likely to worsen based on current growth trajectories and land holdings".

Asda, owned by Wal-Mart of the US, called for planning to be at the heart of the inquiry because it believes the existing regime has a "substantial restrictive and distortionary effect on competition". It cited evidence that showed only one-third of the urban population has access to four different shop fascias, while only one-fifth of the rural population does. The planning regime, which is aimed at protecting town centres and would require legislation to alter, requires the presence of four different fascias in an area before an incumbent can open a second store. But it fails to take local market share into account before, for example, allowingstore extensions.

Morrisons said the planning policy's failure to distinguish between different fascias was a "fundamental flaw". It called for the requirement to build new stores as close to town centres as possible to be relaxed.

In its submission, Tesco was a lone voice in challenging the Office of Fair Trading's assertion that the planning regime was restricting competition. Tesco said it did "not accept that the regime ... advantages or disadvantages any particular retailer." It claimed it had a "pipeline" of potential new sites, not a "landbank".

The commission is expected to publish its initial findings before Christmas and wrap up the probe by next summer.