The grocery market is one of the most competitive in British retail, according to a report published before the release of the Competition Commission’s preliminary verdict on the power of the big four supermarkets.

Tesco, J Sainsbury, Asda and Wm Morrison share more than eight out of ten of their regular customers with rivals, according to Verdict Research. The report claims that “it is virtually impossible for any one player to form a monopoly”. The report argued: “Despite the growth of the main grocery players over the past five years, customer-sharing numbers remain virtually unchanged, showing that customer choice has not been diluted and that people are still able to shop around.”

It said that competition had increased in recent years as Morrison and Sainsbury’s had sorted out internal issues, while growing interest in ethical and environmentally sourced produce was helping to fuel the growth of alternative players, such as farmers’ markets.

However, pressure groups said that the Competition Commission needed to act to prevent the increasing dominance of the four big. Vicki Hird, a Friends of the Earth supermarket campaigner, said: “The evidence is undeniable: consumers, farmers, small shops and the environment are all suffering as a result of supermarket dominance. The so-called tough competition between the big four is not healthy, and rules, which should ensure that competition works for society as a whole, are failing.”

Today the competition watchdog is expected to call for a toughening-up of the supermarket code of practice, rules introduced to protect suppliers after an earlier inquiry found that farmers and manufacturers were suffering from the increasing concentration of buying power among the big four. But only a tiny number of complaints have been filed under the code because suppliers are afraid that they will lose business if they come forward. James Lowman, the chief executive of the Association of Convenience Stores (ACS), said yesterday: “If you can find anyone who thinks the supermarket code works, then tell me – I don’t know anyone. The reason it doesn’t work is that it is not properly enforced.”

The commission is expected to recommend the installation of an independent ombudsman to oversee relations between supermarkets and their suppliers. Mr Lowman said that this would be a positive move.

“If there is a more proactive enforcement, then that’s a good thing,” he said. “It doesn’t get to the nub of the problem, which is the difference in buying power, but it is a step in the right direction.”

The ACS, which represents thousands of independent grocery stores, also supports the Town Centre First initiative, which asks local authorities to encourage development on high streets rather than out of town. It asserts that its members are being put out of business by a 13 per cent increase in retail space held by large supermarkets in the past seven years.

The commission is thought likely to criticise supermarkets for holding on to development sites for longer than necessary to keep out competitors and for the use of “restrictive covenants”, under which land or stores are sold on the condition that they are not used by rivals. However, the commission is expected to suggest a review of the Town Centre First policy as part of an effort to increase competition among larger stores.

The watchdog has already raised concerns that 36 per cent of the big four chains’ stores have no more than two rivals within a ten-minute drive and nearly 100 big stores have no large competitor within a ten-minute drive.

One significant hindrance to competition is seen to be the “needs test” that controls the amount of retail development allowed based on population. The needs test was found to be a “barrier to competition” in 40 local authority areas by the Competition Commission, which is expected to recommend that the test be scrapped.

In its Planning White Paper, which was released in May, the Government indicated that it wanted to ditch the needs test. The White Paper proposals are in consultation, the results of which are expected to be published next month.

The Competition Commission’s provisional findings are expected to argue that competition could be encouraged by the introduction of a “fascia” test, which would foster preferential treatment for retailers that lack a presence in an area.

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