Tesco juggernaut stopped by referral of Co-op stores deal

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The Independent Online

The Office of Fair Trading yesterday signalled a tough new regime for market share-hungry supermarket groups when it threatened to refer Tesco's acquisition of a single Co-op store in Slough to the top competition regulator.

The watchdog warned Tesco that unless it agreed "suitable undertakings to address competition concerns" it would ask the Competition Commission to investigate the deal, which has been attacked by Slough residents as anti-competitive.

The former Co-op site, just 400 yards from an existing Tesco store, was reopened last week under the group's increasingly familiar red, white and blue banner.

Penny Boys, the OFT's executive director, said: "Local consumer complaints prompted our investigation [which] confirms that Tesco's acquisition of the Slough Co-op store reduces the already limited number of competing one-store shops in this area." Tesco itself has another superstore just 10 miles away in Amersham, and smaller Tesco Metro sites in the nearby towns of Chalfont St Peter and Uxbridge.

Analysts said the threat of a referral highlighted how seriously the competition authorities were taking the march of the major supermarket groups in the light of Wm Morrison's planned £3bn takeover of Safeway. "It sends a fairly clear message that the OFT will have a look at every single transaction that may affect local competition," one food retail analyst said. "It is going to slow down the gestation period of any transaction for the major operators."

A Tesco spokeswoman said the former Co-op site had been acquired to allow the group to redevelop its neighbouring 60,000 square foot store without losing any custom. "We want to avoid an unnecessary referral," she said, adding that the group had "never intended" to run both sites for long.

Although the growth of Tesco - already the country's biggest supermarket operator with 27 per cent of the grocery market - has alarmed rivals, who are particularly concerned at its recent move into the convenience store sector, analysts said yesterday's announcement had wider ramifications. "It has nothing to do with Tesco per se. If Tesco has a monopoly in a local market that won't be supported. But the same would be true of Sainsbury's or Asda," one said.

Separately, Tesco unveiled a £110m windfall for more than 45,000 staff. It said checkout assistants, delivery drivers and managers were among those pocketing payouts of up to £30,000 as two save-as-you-earn schemes matured.