Tesco and Sainsbury’s fight their corners over inquiry

However, in its own submission also published today, Sainsbury’s has urged the Commission to subject Tesco to “a more stringent competition assessment than its competitors”.

In a strongly worded document, Tesco said: “Some of the proposals made by the Commission – on the basis of work we think flawed – would actually undermine competition, reduce innovation and freeze investment.”

The Commission has to deliver the final report of its two-year inquiry into the£130 billion UK grocery sector before May 8.

In particular, Tesco lambasts the proposed competition test designed to prevent food groups owning more than 60 per cent of the grocery floorspace in a particular area. It said: “The competition assessment is intended to restrict expansion and may freeze local catchments, as one or more retailers already present could be reliant on new entry occurring before they could grow.”

Tesco said the competition test would stifle a large portion of its store plans – particularly store replacements or extensions. “Of the Tesco pipeline sites that the competition assessment would seek to prevent, over 80 per cent are proposed replacements or extensions intended to modernise and enhance our consumer offer,” the grocer said. “This freeze on investment has serious ramifications for our economy.”

The Cheshunt-based grocer said the ombudsman proposal is “misguided” and “would not be in consumers’ interest”. Tesco said: “An ombudsman charged with protecting suppliers’ interests would create only unnecessary bureaucracy and may lead to increased prices to consumers.”

The world’s third-largest grocer also warned that the proposal to limit exclusivity agreements to five years may mean developers find it more difficult to attract retail anchors to shopping centres.

Rival Sainsbury’s has urged the Commission to apply the competition test “asymmetrically” to Tesco.

Sainsbury’s said: “Its [Tesco’s] national share of sales and purchasing cost advantage provided Tesco with a unique ability to outbid its competitors and engage in predatory behaviour towards new entrants to its local markets. The Commission ignores Tesco’s unique ability and incentive to act in this way and does not suggest any measure to address these combined effects.”

According to TNS Worldpanel, in the 12 weeks to March 23, Tesco had a 31 per cent share of the market, while Sainsbury’s had 16.2 per cent.

Sainsbury’s called for the Commission to direct the Office of Fair Trading to “keep Tesco’s national market position under regular review”. Sainsbury’s has criticised other proposed remedies from the Commission, such as its new Grocery Supplier Code of Practice and remedies on controlled land, which it calls an "unnecessary interference".