Britain's competition regulator today defended plans for a new test for supermarket groups, saying its proposals could yield £1.9 billion of benefits to consumers over 25 years.
The Competition Commission concluded in April 2008 that action was needed to improve competition among supermarkets in a number of local markets and proposed a new test for planning decisions on larger stores.
The test would apply to new or extended stores of over 1,000 square metres. It would examine the number of competitors within a 10-minute drive time and aim to ensure no single retailer had more than 60 percent of grocery sales in that locality.
An appeal against the decision by Tesco , Britain's biggest retailer, was upheld by the Competition Appeal Tribunal (CAT) in March, which said the commission had not properly assessed the costs of the test and had failed to address its proportionality and effectiveness.
The commission said today it had conducting a detailed analysis which compared the benefits of increased competition against the costs from any delay between a dominant retailer's development being blocked and a rival taking its place.
"The analysis concluded that over the longer term, the benefits to consumers would outweigh any such initial costs," it said in a statement.
Using a net present value model to estimate the benefits and the costs, the commission concluded that the benefits arising from the test could total £1.9 billion pounds over 25 years.
Tesco said the proposed test would not help consumers.
"We are concerned that the commission findings rely heavily on far-fetched assumptions which don't reflect the reality of the planning system," it said in a statement.
"The main effect of the proposed test will be to deter extensions which will prevent many older stores being updated to provide a better offer for customers up and down the country."
The commission has asked for responses to its analysis by July 29th and plans to publish a final decision by October 5th.
A commission spokesman said the test would then be sent to the government for enactment and it was possible it could be introduced next year. However, it could also be subject to further legal challenges which could cause delays, he added.
Reuters