Sainsbury's chairman calls on regulators to rein in Tesco

Philip Hampton, the chairman of J Sainsbury, has lobbied the UK's competition authorities in person in an attempt to check Tesco's growing domination of the grocery market.

Mr Hampton, who took over as Sainsbury's chairman in July last year, briefed senior officials at the Office of Fair Trading in late summer about measures the watchdog could take to limit Tesco's rising market share.

These could include imposing an absolute cap on the share of the grocery market any one supermarket is allowed, or a change in the regulations so that the competition authorities treat new store openings in the same way as the acquisition of stores from rival supermarkets.

Mr Hampton's unprecedented approach to the OFT demonstrates the acute concern felt among rival supermarket groups about Tesco's runaway growth and the long-term implications this could have for consumer choice and grocery prices.

It also piles further pressure on the OFT at a time when it is facing increased demands to refer the whole grocery market to the Competition Commission again for a full-blown inquiry. The Competition Appeals Tribunal (CAT) yesterday quashed a decision by the OFT this year not to refer the supermarket sector and told it to rethink its position.

Tesco's share of the grocery market stands at 30.3 per cent - twice that of its nearest rival, Asda - according to figures compiled by the market research group Taylor Nelson Sofres. Rival supermarkets calculate that this will grow to 42 or 43 per cent within the next six years - and possibly 47 per cent - based on the rate at which Tesco is using its vast land bank to open new superstores.

In the past 12 weeks, its share of the till roll in stores of more than 14,000 sq ft - the standard definition used by the OFT to denote a "one-stop" supermarket where a shopper could do an entire weekly shop - stood at 36 per cent, according to industry sources.

The fear is that if Tesco's market share is allowed to creep towards 50 per cent, it will have such a dominant position that it will be able to raise prices - enabling its competitors to do likewise.

This year Tesco intends to open 2 million sq ft of new floor space. Its plans include the opening each year of 20 giant Tesco Extra stores, some with a floor space of 100,000 sq ft - seven times the size of a standard supermarket.

Justin King, the chief executive of Sainsbury's, has been an outspoken critic of Tesco's untrammelled growth, as has Lee Scott, the chief executive of Asda's parent company, Wal-Mart. One supermarket executive said the "salami slicing" fashion in which Tesco was able to grow its market share by new store openings or extensions meant it was government-approved, yet with no overall oversight of the impact on competition. "Each deal is below the radar screen but the cumulative impact is now very apparent. I don't think this has happened before in a key sector central to effective competition in the interests of consumers," the executive said.

The CAT's ruling yesterday came after the OFT decided not to contest an appeal by the Association of Convenience Stores over the earlier refusal to refer the grocery sector. The OFT asked for eight months to decide whether a referral was necessary, but the tribunal chairman Sir Christopher Bellamy ordered a speedier decision. The OFT said last night that it would complete the review "as quickly as we practicably can".