Supermarket giant fights monopoly claimIt denies it's creating a country of 'Tesco towns'

02 April 2007

 

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Supermarket giant Tesco today denied it was creating a country of ‘Tesco towns’ as it set out a robust defence to accusations it has a near monopoly of the UK grocery market.

The group claimed in a 28-page document to the Competition Commission that the body's calculation methods and definition of ‘local’ were flawed.

Tesco's report - published today - says markets should now be defined by a drive-time radius of 30 minutes or more - three times the 10 to 15 minutes used by the Commission.

Far from dominating the supermarket sector in British towns and cities, 98.6 per cent of shoppers now have access to stores of the five largest chains, according to the grocery group.

Market dominance

The supermarket argued that the grocery market was now ‘national’ and not local as shoppers increasingly buy online and are prepared to travel further to visit a store.

Tesco said: ‘We do not vary our retail offer in line with levels of local competition. We and all the other major grocery multiples have national strategies on pricing, branding, advertising, quality, range and service.’

The group added: ‘The way in which customers do their grocery shopping has changed. Customers are now doing different types of shopping trip in different types of stores - from farmers' markets to the internet - with the result that smaller stores now impose an even greater competitive constraint on larger stores.’

The increase in choice available has seen consumer switching soar from £6 billion in 2002 to over £10.3 billion last year, according to the group's submission.

Land banks

Tesco's defence comes in response to the Commission's initial ‘emerging thinking’ document released in January.

The Office of Fair Trading referred the grocery sector to the Commission in May last year after evidence suggested some supermarket chains were abusing their size to stifle competition by pricing products below costs and by using banks of unused land to stop rivals opening stores.

Tesco argued in its submission that it has a national price list and that there were ‘no material variations in our retail offering between local areas’.

On the issue of so-called land banks, it blamed the difficulty experienced by some players in entering markers on the planning system, which it said needed to be faster and more efficient.

Tesco also criticised its rivals for ‘not being as flexible as we have’.

The Commission is set to publish preliminary findings in June, with a final report due in November. The inquiry is the third into the supermarket sector in seven years.

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