Tesco faces late legal challenge over bid for convenience stores

Tesco is facing an eleventh-hour challenge to its £53m purchase of Adminstore, the London-based group behind the Cullens, Europa Foods and Harts the Grocer convenience store chains.

The Federation of Wholesale Distributors has teamed up with Big Food Group, Iceland's parent, to launch a legal appeal against the Office of Fair Trading's decision to clear Tesco's acquisition of Adminstore. The pair lodged their claim with the Competition Appeals Tribunal - the new body set up to scrutinise OFT decisions - on Friday.

Alan Toft, the director general of the cash and carry lobby group, yesterday called the competition watchdog's judgement "flawed", adding: "By giving Tesco the green light, the OFT is merely adding to Tesco's buying power." He said it was "schizophrenic" that the watchdog had opted to clear a deal that increased Tesco's sway over its suppliers, while stepping up an investigation into claims that supermarket groups abuse their buying power.

"Is it logical that on one level they [the OFT] are sending investigators into supermarkets' trading offices and at the same time they are giving them more buying power?" Mr Toft said.

Bill Grimsey, Big Food Group's chief executive, said the OFT had based its decision on a "misguided assumption that the grocery market is divided, when it is clear that there is only one market for groceries".

Although Tesco controls some 27 per cent of the UK grocery market - above the 25 per cent threshold that sets competition alarm bells ringing - it argues that its 6 per cent of the convenience store sector means it should be allowed to buy groups like Adminstore. So far, the OFT appears to agree.

But the three London-based chains will give it an estimated 22 per cent share of the lucrative top-up shopping market in some of the richest parts of the capital. For many of London's well-heeled, Europa, Cullens and Harts are their corner shops.

"Tesco will virtually buy central London with this acquisition," Mr Toft said. Asked to rate his chances, he said: "We are very confident in the sense that this issue is being looked at by people with fresh eyes who haven't considered the imbalance in the grocery market ever before."