Competition Test for Grocery Stores
The Competition Commission has recommended to the Department for Communities and Local Government that they should introduce a competition test into the process for taking decisions on granting planning permission for larger grocery stores. The Competition Commission believes that the introduction of the competition test will bring “significant and lasting benefits for customers”. The idea of the competition test is that it would prevent grocery supermarkets from developing new stores or extending existing ones where the supermarket already has a strong presence in a local area in order to make it easier for rival retailers to carry out competing developments so that customers have a range of supermarkets to choose from.
Challenge to the proposed competition test
The Competition Commission originally made the recommendation to introduce a competition test for larger grocery stores in April 2008 but their recommendation was challenged by Tesco. The Competition Appeal Tribunal considered the matter and ruled firstly, that the Competition Commission had not properly assessed the economic costs of the competition test and secondly, that it had not sufficiently considered the proportionality and effectiveness of the competition test. The Competition Commission gave the matter further consideration and concluded that the benefits of the proposed test would far outweigh any costs it caused.
Modification of the proposed competition test
The Competition Commission has now modified the proposed competition test to allow all retailers to make small grocery extensions to stores. One extension, of up to 300 square metres of groceries sales area, per store will be permitted provided the store has not been extended in the last five years.
How will the proposed competition test work?
The proposal is that the competition test should be applied for all applications for planning permission for the development of a grocery store, whether a new store or an extension to an existing store, where the store has or will have a net sales area in excess of 1,000 square metres once the proposed development is implemented. In order to administer the competition test, the Office of Fair Trading would be a statutory consultee on planning applications for larger grocery stores and would advise local planning authorities on whether a particular retailer would pass the competition test.
Applicants would pass the competition test if, within an area of 10 minutes driving time from the development site:
The grocery retailer who would operate the new or extended store is a new entrant to the area;
The total number of fascias in the area is four or more; or
The total number of fascias in the area is three or fewer and the grocery retailer would operate less than 60% of groceries sales area including the new store
Grocery retailers will now be watching to see whether the Department of Communities and Local Government will take up the Competition commission’s recommendation to introduce the competition test to the planning system.
This article was first published in the Property Law Journal on 23 October 2009.
