Tesco secured victory today in its battle against plans to introduce a “competition test” to curb supermarkets’ dominance of the grocery sector.

The test was unveiled by the Competition Commission last year as part of a planning shake-up designed to boost competition in the multi-billion pound grocery market.

But the Competition Appeal Tribunal (CAT) agreed with Tesco that the Commission did not fully take account of the fact that the test, relating to planning decisions for larger stores, might have “adverse effects for consumers”, among other matters.

Tesco welcomed the decision as a “victory for common sense”.

Executive director Lucy Neville-Rolfe said: “It would be particularly perverse to introduce a test that would block investment in the current economic climate.”

But CAT’s decision was met with dismay from the Association of Convenience Stores (ACS), which represents 33,000 local shops. It argued the ruling would slow down the introduction of an effective town centre planning policy.

ACS chief executive James Lowman said: “We need a clear robust retail planning policy that resists harmful out-of-town development and gives power to local people to build vital and vibrant centres for their community.

“Government has been looking at this issue for over three years and while there remains confusion, planning authorities are weaker and less effective.”

The proposed competition test was part of recommendations from the Competition Commission following its two-year probe into the sector, and would have ensured authorities blocked expansion plans if there were many large grocery stores in the area or if the retailer applying already had a substantial part of the market.

The tribunal said its decision did not rule out the possibility that the test could one day be lawfully recommended and implemented by the Commission.

However, the ACS said it was unlikely that revised Government planning policy, expected in spring, would contain a competition test.

Tesco, the market leader in the sector, said the test would have stopped almost a quarter (24%) of existing large grocery stores from extending, acting as a “cap on growth”.

The supermarket argued retailers would be prevented from meeting demand and developing, thereby giving consumers access to better facilities and more products.

The tribunal agreed that if one retailer was blocked from developing a store, it did not mean  another would automatically go ahead with expansion “taking up any slack”.

It said: “There are a good many reasons why, if one retailer is blocked from developing a store, a replacement development by a different retailer may not occur for some considerable time or at all.”

Commenting, the Competition Commission said the judgment did not challenge the rationale for a competition test to tackle local supermarket monopolies.

A spokesman said: “The appeal was upheld on the narrow grounds that certain considerations about how the test would work and its costs and benefits should have been explored further in the report.

“We will now study the judgment closely before deciding our next steps.”
Meanwhile the ACS, which supported a competition test, criticised the Commission over its inquiry into the grocery market.

Mr Lowman said: “Having gathered evidence for over two years, and in spite of having identified real consumer detriment, the Commission has yet to put in place any of the measures that it concluded were necessary for a fairer market.”