Page last updated at 14:50 GMT, Wednesday, 31 October 2007

Probe says 'too few supermarkets'

Supermarket carrier bags
The reports says more competition is needed in some areas

A revamp of the planning system to allow more supermarkets to open in some areas of the UK has been called for by the Competition Commission.

In its preliminary report it suggests forcing supermarkets to sell land they own in areas where there are not enough different chains of retailers.

But the report said that in most areas the UK groceries market was delivering "a good deal for consumers".

The commission also called for further measures to protect suppliers.

BBC business editor Robert Peston
It certainly looks like anti-competitive behaviour on a magnificent scale
Robert Peston, BBC Business Editor

"We are not happy with everything that is going on between supermarkets and their suppliers," Peter Freeman, chairman of the Competition Commission told the BBC.

"In general, a healthy tension is a good thing for consumers but we are concerned about some aspects," he added.

Encouraging complaints

The report said it was concerned about retailers being able to transfer unexpected costs to their suppliers.

Pie chart of shares of UK food and grocery retailing
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The commission will consult retailers and suppliers about how best to deal with this problem.

There is already a code of practice for the treatment of suppliers, which was set up after the commission's last report on the sector in 2000.

One question is whether suppliers need to be encouraged to complain about their treatment by retailers and how to go about doing so, perhaps by offering them anonymity.

The report dismissed suggestions that the market-leader, Tesco, is too strong, saying: "Tesco is not in such a strong position that other retailers cannot compete".

It pointed to the fact that other grocers are still expanding as evidence that Tesco is not too powerful.

"There can be no doubt that shopping for groceries is better for consumers than it has ever been," said Lucy Neville-Rolfe from Tesco.

"All the benefits to consumers have come about because retailing in this country is intensely competitive and customers are quick to punish shops that disappoint them," she added.

Supermarkets ombudsman

There will also be consultation on whether having an supermarkets ombudsman would be a good idea.

Peter Kendall, president of the National Farmers' Union, supported the suggestion of an independent voice that could hold retailers to account.

Tesco shopping trolleys

"We try to do it as a farmers' organisation. It's important we have a fair and balanced relationship with the retail sector," he said.

The commission found that consumers have good choice between retailers in most areas, "but in a number of local areas more competition would benefit consumers".

It suggests introducing a competition test into the planning process that will allow the position of existing supermarkets to be taken into account.

Selling land

It is also considering rules to stop retailers using restrictive covenants when they sell land that make it less likely that rival shops can be built there.

It may also decide that any land owned by supermarkets must be sold if it is not developed within a certain amount of time.

Such measures would be designed to deal with allegations of "land-banking", which is the practice of buying up land near a store to prevent a competitor being able to open an outlet nearby.

They could be good news for the smaller of the big four supermarkets.

"These (measures) could result in Morrisons being represented in more localities, offering consumers more choice for their grocery shopping," Morrisons said in a statement.

"We continue to be fully supportive of the inquiry process and are confident that consumers will continue to benefit from choice and value, delivered by an intensely competitive UK grocery market," it added.

The report from the Competition Commission is not final.

Supermarkets will have the opportunity to respond to its findings before the final recommendations are published in March 2008.

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The chair of the Competition Commission on the report

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