Page last updated at 10:31 GMT, Friday, 2 October 2009 11:31 UK

Supermarkets face planning test

Morrisons, Asda, Sainsbury's and Tesco stores
The grocery sector was referred to the Competition Commission in May 2006

The Competition Commission will press ahead with tougher planning hurdles to stop supermarkets dominating in a local area - but has revised its rules.

It has recommended a "competition test" to prevent firms with a strong presence in an area from building new stores or making major extensions to its outlets.

However, small extensions will be allowed in some circumstances after the watchdog reviewed its plans.

Consumers would still see "significant and lasting benefits", it said.

"We expect that the competition test will have the effect we intend by helping to bring in competition where it is lacking and to stop individual retailers consolidating strong positions in local areas to the detriment of consumers," said the commission's chairman, Peter Freeman.

Extensions

The grocery sector was referred to the Competition Commission in May 2006 amid concerns major retailers were too powerful in some areas.

Tesco, the UK's biggest supermarket chain, challenged the introduction of the competition test earlier this year.

The Competition Appeals Tribunal said the test was not wrong. However, it ordered the watchdog to do more assessment of the economic impact and effectiveness of the test - resulting in the watchdog modifying the details of the requirements.

Under the proposals, retailers will now be able to make small extensions to stores - provided they are no more than 300 sq metres of groceries sales area and have not been modified in the previous five years.

The commission said it believed "that this modification will not significantly reduce the effectiveness of the test but will recognise the fact that such small extensions, if prevented by the test, would be less likely to prompt a rival development".

Rules

Under the test, the Office of Fair Trading will advise UK planning authorities on the potential impact of any new development.

The retailer will pass the test if they are new to the area, or if four or more different supermarkets are within a 10-minute drive of the proposed site.

And where there are three or fewer grocers in the area, the application will be given the green light so long as it does not then account for more than 60% of total retail space.

Tesco said that the commission had made the "wrong recommendation" and the test would act as a "brake on growth" for the industry.

"The government should think very carefully before proceeding with this recommendation and intervening aggressively in what is acknowledged to be a highly competitive industry and deterring investment in these difficult economic times," said corporate and legal affairs director Lucy Neville-Rolfe.



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