LAWYERS for Tesco have admitted that the supermarket chain has signed controversial contracts with a number of local councils that bar them from selling land to other supermarket chains.

The admission was made by the City law firm Berwin Leighton Paisner during an inquiry by North Norfolk district council.

It comes as the Competition Commission begins an investigation into whether supermarkets have stifled competition by assembling “land banks” or frustrating attempts by rivals to build supermarkets in specific towns.

The inquiry was ordered by North Norfolk district council after councillors discovered they were unable to sell council land to Budgens, which wanted to build a store in Sheringham.

Council officers — they learnt — had signed an agreement with Tesco in 2003 as part of a deal to develop a store on land owned by Tesco and the council on the edge of Sheringham. It barred the council from selling land to Budgens, even though the Tesco development had stalled. The agreement has caused outrage in the town.

The Sunday Times understands that about a dozen similar deals have been signed across the country.

A Tesco spokesman said: “We work constructively and openly with planners and local authorities to develop stores that are needed and are popular with communities. The agreement with North Norfolk district council was entered into freely by both parties and did not in any way prevent competition in the town.

“It simply required the landowner, in this case the local authority, to support the significant investment being made by Tesco above other schemes involving other land owned by them. It in no way restricted the authority’s role in the planning process or prevented them from supporting proposals from other supermarkets on privately owned land,” he added.

The 500-page report was posted to council members this week before a council meeting on Wednesday, when councillors will discuss the deal.

The report includes the entire Tesco contract and correspondence between Tesco and the council, providing a unique insight into how Tesco negotiates its land deals.

The report details how, over an eight-month period, advisers to Tesco, run by chief executive Sir Terry Leahy, raised their offer to the council on a number of occasions.

In May 2001, Mark Liell & Son, a property consultant that has worked on a number of Tesco deals, offered the council 11 new flats in exchange for a strip of council land essential for the development.

By December 2001 Tesco raised its offer to include a cash payment of £40,000-£50,000 alongside the 11 flats, before finally raising the cash element of its offer to £200,000 in January 2002.

According to the report, Tesco refused to co-operate with the council inquiry and disclose notes of meetings. The company also refused to waive a confidentiality agreement.

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