The Competition Commission is forcing Britain's biggest supermarkets to free up more than 60 sites for rivals after announcing the findings of a two-year investigation into the £120 billion grocery market.

The watchdog yesterday called for supermarkets to scrap restrictive covenants and exclusivity agreements on key sites in towns and cities across the UK in a package of measures designed to increase competition in the sector.

Peter Freeman, the chairman of the commission, said that while consumers were benefiting from fierce competition in many respects, not all was well.

The watchdog also called for an independent ombudsman to enforce an extended code of conduct, and outlined plans for a planning test that would prevent supermarkets opening stores in towns or cities where they already had a 60 per cent share of the market.

The investigation, the fourth into the grocery market over the past ten years, stopped short of calling for forced store disposals.

The findings brought an outcry from the Association of Convenience Stores (ACS), the trade body that sparked the inquiry with a complaint to the Office of Fair Trading in 2004.

The Competition Commission said that despite extensive research it could find no evidence to back claims from the ACS that supermarkets' buying power was squeezing out smaller stores, or that the convenience sector was in decline.

It added that Tesco's dominance in the grocery market — it controls more than 30 per cent of the market — was not “insurmountable”.

Shane Brennan, public affairs manager of the ACS, told The Times: “The Competition Commission has gone nowhere near far enough in addressing the problems in the marketplace. It's a massive missed opportunity.

“It has failed to deal with the problems and we now have no choice but to talk to ministers and government directly. The fight goes on.”

Mr Freeman dismissed criticism of the investigation and insisted that, despite a potential £2 million bill for taxpayers, it had achieved what it had set out to do.

He said: “We are a competition authority funded by the taxpayer but the way the system works we are asked to do an investigation by other authorities.

“We carry it out without fear or favour and without prejudice. I don't think the taxpayer would expect us to come out with adverse findings in every report.”

Mr Freeman added: “I am not deflated, I don't do deflation.”

Sir Terry Leahy, the chief executive of Tesco, said that he was glad the Commission had laid to rest many of the claims that triggered the investigation. However, he said that the new planning test would make the planning process even slower and could prevent the creation of hundreds of jobs. “We believe it would take away power from the consumers to choose where they shop,” he said.

Andy Bond, the chief executive of Asda, said that the introduction of an ombudsman, to be paid for by the retailers, could force food prices higher. “We strongly believe that the ombudsman should act as a mediator to resolve disputes rather than diving straight into binding arbitration, and should remain focused on the interests of the consumer,” he said.

The report comes just days after the OFT launched the latest in a series of price-fixing investigations in the supermarket sector. It visited the head offices of the big four supermarkets last Thursday to request pricing data on up to 100 household grocery and health and beauty products.

Mr Freeman refused to be drawn on the OFT inquiry but added: “We did not uncover compelling evidence of effective tacit co-ordination over a wide range of products.”

Analysts said that, despite Tesco's concerns, privately it would be relieved about the findings of the report. Nick Bubb, analyst at Pali International, said: “I think they'll regard this as a minor triumph.”

Tesco shares rose 8¼p to 426p. J Sainsbury climbed 8p to 385¼p.

Haven't we been here before?

2000

Competition Commission investigates the Big Four supermarkets amid claims that prices for consumer goods and food were higher in the UK than in Europe and the US. A supplier code of practice was established.

2003

The watchdog investigates potential competition concerns linked to the proposed acquisition of Safeway by Asda, Morrisons, J Sainsbury and Tesco. Recommends that Morrisons buys Safeway but should sell 48 stores.

2005

Somerfield is forced to sell 12 of the 115 stores it bought from Morrisons to prevent a “substantial lessening” of competition in local areas around each site.

2008

Competition Commission rules that competition in grocery industry is effective after two-year investigation triggered by the Association of Convenience Stores and Friends of the Earth. However, it calls for new planning test and ombudsman to oversee extended code of practice.

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