Competition Commission recommends legislation to block supermarkets from expanding in certain locations

The Competition Commission (CC) has recommended to the Department of Communities and Local Government (CLG), along with the devolved administrations in Scotland, Wales and Northern Ireland, that they take the necessary steps to introduce a competition test in planning decisions on supermarkets and larger grocery stores.

The CC’s final report into the UK groceries market, published in April last year, concluded that action was needed to improve competition in a number of local markets, and included a recommendation for the inclusion of a competition test in planning decisions on larger grocery stores.

The CC has been carrying out analysis on the effectiveness, benefits, costs and proportionality of the competition test following a ruling by the Competition Appeal Tribunal. The competition test would prevent supermarkets’ groceries developments, including extensions to existing stores, by retailers with a strong presence in a local area, to make competing developments from rival retailers easier.

The CC published its provisional decision in July and, after considering responses to that document from retailers and other parties, has now made its final decision.

In response to the July consultation, the CC modified the competition test to allow all retailers to make small groceries extensions to stores—one extension per store of up to 300 sq metres of groceries sales area—provided that the store in question has not been extended in the previous five years. The CC believes that this modification will not significantly reduce the effectiveness of the test but will recognize the fact that such small extensions, if prevented by the test, would be less likely to prompt a rival development.

The CC expects that in taking the necessary steps to introduce the competition test, CLG and the devolved administrations will consult further on its details and implementation, including the exception for small groceries extensions.

Peter Freeman, Chairman of the CC and Chairman of the Groceries Inquiry Group, 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. We were asked to look at the case again by the Tribunal—and we believe we have shown the test will be effective, beneficial to consumers and proportionate.

'Our detailed analysis has shown that the competition test is likely to have a positive effect for consumers by ensuring that they benefit from greater competition and choice between retailers both in their local areas and across the UK.'

We have, however, provided an exception for small extensions to the groceries part of stores, provided those stores have not been extended in the previous five years.