The Competition Commission has said it will press ahead with tougher planning hurdles to stop supermarkets dominating local markets.

The watchdog has formally recommended a ‘competition test’ which will prevent those with a strong presence in a particular area shutting out rivals by building more stores or major extensions to existing outlets.

Chairman Peter Freeman 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.”

Under the test, the Office of Fair Trading will advise UK planning authorities on the potential impact of any new development.

Applicants would pass the test if the retailer was new to the area, or if there were four or more different firms in the market within a 10 minute drive of the proposed site.

With three or fewer retailers in the market, the store would be approved if it does not give the applicant more than 60% of grocery selling space.

The UK’s biggest grocer, Tesco, challenged the introduction of the competition test earlier this year.

While the Competition Appeals Tribunal did not come down against the measure, it ordered the Commission to carry out more work on assessing the economic impact and effectiveness of the test.

Since a further consultation in July, the Commission has made a minor exception to allow retailers to make small extensions of up to 300 square foot per store - as long as there have been no previous extensions in the past five years.