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Last Updated: Tuesday, 1 November 2005, 15:39 GMT
OFT faces supermarket challenge
Tesco Express store
More supermarkets are adopting the convenience store format
Thousands of small stores are heading to court in the latest round of their challenge against big supermarkets.

The Office of Fair Trading (OFT) is facing an appeal against its decision in August not to refer the grocery market to competition watchdogs.

The Association of Convenience Stores launched the appeal after the OFT ruled the grocery market was not restricted.

The ACS says supermarket competition led to the closure of almost 2,000 independent stores last year.

The OFT is widely expected to withdraw its ruling at the Competition Appeal Tribunal hearing, having announced on Friday that it was reconsidering its decision not to refer this sector of the market to the Competition Commission.

We do need a review of the grocery market
David Rae, Association of Convenience Stores

It added that it had made the decision on "insufficient reasoning".

Review hopes

Experts now predict that the OFT will offer to re-examine the matter.

ACS chief executive David Rae told the BBC he such an outcome would be "75% of what we wanted".

"We need them to go back to look at the evidence and come up with the right conclusions. We do need a review of the grocery market."

He said there had been "large holes" in the OFT's explanation for why it had decided not to refer the grocery market to competition regulators, in particular the OFT's claim that it had not received certain bits of evidence.

Mr Rae said that the group was also concerned about the OFT's ruling on below-cost - or loss-leader - sales, the buying power of supermarkets and its long term effects on the supply chain.

"It's predatory pricing and there's evidence submitted by us and others of that happening. Yet in the ruling the OFT said there was no substantial evidence (on below-cost pricing)," he added.

The ACS, which has around 30,000 members, want the Competition Commission to look into the dominance of the four big supermarket names - Tesco, Asda, Sainsbury's and Morrisons - in the grocery market.

Dominance worries

The group has also voiced fears over the effect that the increasing presence of big names in the convenience store market.

Big names are snapping up smaller retail spaces for convenience store formats - buying out local retailers and other sites.

Analysts believe this format will be the next growth area of the supermarket sector, as the smaller local stores become popular with the "time-poor, cash-rich" parts of the population.

Tesco itself is already planning permission for a number of outlets, including a rapid expansion of its Express format stores across the country, many on garage forecourts bought from Safeway.

That development has prompted rivals Asda and Sainsbury's to demand changes to planning rules to prevent Tesco eating up 40% of the UK convenience market.

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