Tesco tried to railroad the Competition Commission into considering the broadest possible definition of the grocery market yesterday after failing to persuade the regulator to accept its arguments in a document expected to be released next week.

Britain’s biggest supermarket released a 28-page document arguing that the UK grocery market should be considered as one national market and that “local” should mean as much as a 30-minute drive from a store.

The release came after the supermarket’s failure, over weeks of discussions, to persuade the Competition Commission to accept such a broad market definition in its own working paper, which is expected to be released next week. That document is likely to stick to the commission’s historic definition of local markets as within a ten to fifteen-minute drive from a store.

Rival retailers and competition experts dismissed as “ridiculous” Tesco’s argument that shoppers would be prepared to drive half an hour to find a store with prices 5 per cent cheaper. They said that only a tiny proportion of consumers would consider such a journey.

One competition expert said: “This document smacks of desperation by Tesco. If they couldn’t agree something behind closed doors, going public is not likely to sway the commission.”

Tesco also argued that their large stores were competitively restricted by small shops, because a “significant proportion” of shoppers spent more than 60 per cent of their weekly budget in Tesco Express or Sainsbury’s Local stores.

Discount retailers, such as Aldi and Lidl, as well as internet stores, which account for a tiny percentage of total sales, should also be included as competitors, Tesco argued.

The regulator is considering whether it should alter the way in which it assesses local markets beyond a split between “one-stop shops” and convenience top-up shopping. Previously it has argued that large stores act as a competitive restraint on smaller stores, not the other way round, and it is considering the competitive role of medium-sized stores.

However, the Competition Commission is thought unlikely to move significantly away from its market definitions in the forthcoming working paper.

Tesco said: “Our tests in themselves don’t prove the market is national, but disproves the idea of the ten-minute market.” It argues that it sets prices and strategy nationally and so this is the way that regulators should consider the market.

Tesco wants to move the regulators away from close consideration of competition in local markets because its strong presence in many postcode areas, for example, might lead to it having to divest stores or being prevented from making future acquisitions.

Do supermarkets check out?

May 2006 The Office of Fair Trading asks the Competition Commission to investigate the power of the supermarkets

June Outlines scope of inquiry

January 2007 Reveals first findings from evidence presented by retailers and interested parties

June To release provisional findings

July To reveal potential actions against supermarkets

November Final report due

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