Tesco's expansion plans in the UK received a major boost yesterday when it won its appeal against a competition test designed to slow its growth, but its victory may be short-lived after the Competition Commission hinted it was determined to see a revised proposal come to fruition.
After the final report into the grocery inquiry in April 2008, the world’s third-largest retailer challenged with the Competition Appeals Tribunal the proposed introduction of a competition test that would prevent a retailer from gaining a dominant position in a local market.
Yesterday, CAT upheld Tesco’s appeal, largely on the grounds that it did not “fully and properly assess and take account of the risk that the application of the test might have adverse effects for consumers”. More specifically, CAT identified that if one retailer was blocked from developing a store in a local area, then a replacement development by a different retailer may not occur.
Lucy Neville-Rolfe, executive director of corporate and legal affairs at Tesco, said: “I think it’s great news for consumers because it means we can continue to invest in parts of the country including deprived areas and bring modern retailing to them.”
She added: “It would be particularly perverse to introduce a test that would block investment in the current economic climate.”
Tesco, which has a 30.3% share of the grocery market, according to TNS Worldpanel, had most to lose from the competition test, which aimed to prevent a retailer opening a new store, or extending an existing one, over 1,000 square metres that would mean it surpasses a 60% limit of retail space in a specific location.
Tesco cited the commission’s finding that the test would prevent 24% of existing larger grocery stores in the UK from extending those outlets. It pointed to the commission’s own finding that new store construction can create extra capacity.
A commission spokesman said that the judgment “did not challenge the rationale for a competition test to tackle local supermarkets monopolies or its design”. He added: “The judgment itself leaves the possibility of introducing the test in the future subject to addressing some of the issues raised.”