Tesco escapes Competition Commission rap

The Competition Commission has found that Tesco does not stifle competition, according to its provisional findings published today (31 October) after an 18-month investigation into the UK groceries market.

The Competition Commission’s report said: “Expansion by other grocery retailers continues, which suggests that Tesco’s purchasing cost advantage, share of national grocery sales or expansion into convenience store retailing is not acting as a barrier to expansion by other grocery retailers. “
The Competition Commission’s findings will be a boon to Tesco, Britain’s largest supermarket and Freshfields Bruckhaus Deringer client.

The mammoth chain has long been singled out for potential anti-competitive behaviour by Britain’s various regulators.Tesco now controls one-third of the UK market and also has the largest “land-bank”, or supply of undeveloped real estate. Meanwhile, three-quarters of the grocery market is controlled by the “big four”.

Aside from Tesco, the other principal supermarkets also called in their preferred advisers. Asda turned to Slaughter and May; Sainsbury’s looked to Linklaters; and Ashurst is advising Morrison’s.

Although today’s report found no evidence of price-fixing, it did state that competition could be improved. Several remedies were floated, such as the divestment of land where there is not much competition; the prohibition of restrictive covenants on land; and changes to the Supermarkets Code of Practice, which regulates the relationships between supermarkets and suppliers.

Competition Commission chairman Peter Freeman said: “Having looked in detail at local grocery markets, in most areas shoppers have a good choice and benefit from the strong competition between retailers, but in a number of local areas more competition would benefit consumers both locally and more generally.”
Final recommendations will not be published by the Competition Commission until March and in the interim the supermarkets will all have a chance to respond to today’s report.

The Competition Commission’s findings follow those by the Office of Fair Trading (OFT) in September after a separate investigation into price-fixing of dairy products by the biggest supermarkets and dairies (see www.thelawyer.com, 20 September).