Competition Commission calls for ‘competition test’ in planning and action against land banking

In its final report published today following a two-year investigation into the multi-billion pound UK grocery industry it said that overall the industry was delivering a good deal to the consumer.

However, it said the ‘competition test’ should be used when deciding planning decisions for larger grocery stores as there was a ‘significant number of local areas where larger grocery stores face limited competition and local shoppers lose out’.

It has recommended the following measures including that:

• The Office of Fair Trading (OFT) be made a statutory consultee to all local planning authorities on applications submitted by a retailer or a third party for the development and/or extension of large stores with a net retail area of more than 10,700 sq ft.

• Stores could pass the ‘competition test’ if, within the area bounded by a 10-minute drive time of the development site, the retailer was a new entrant to that area, or the total number of fascias in that area was four or more. If there are less than three fascias the retailer could pass the test if it only operates less than 60% of the total groceries sales area, including the new store.

• The commission has recommended that the Department for Business Enterprise and Regulatory Reform amend the Competition Act 1998 (Land Agreements Exclusion and Revocation) Order 2004 to ‘remove from its scope the type of exclusivity arrangements which the Competition Commission has found to raise competition concerns’.

Land banking

In addition, large grocery retailers have six months from the date of the report to release 30 existing restrictive covenants in highly-concentrated local markets that have been identified by the commission as evidence of land banking.

Retailers must also provide the OFT with accurate sales floor figures and inform it of any acquisitions of existing stores of more than 10,700 sq ft.

No forced sales

The commission has not required the sale of any stores or land holdings nor has it made any recommendations regarding the 'need' test or 'Town Centre first' policy, which is being addressed in the government’s reforms of the planning regime.

Peter Freeman, chairman of the Competition Commission and inquiry group, said the measures proposed are sufficient and proportionate in addressing its concerns.

‘That is why we want to see the introduction of a competition test as part of the planning regime to prevent local areas developing like this in the future. We are also taking action to prevent retailers using restrictive covenants and other agreements to frustrate entry by competitors in such areas,’ said Freeman.

‘In many important respects, consumers are receiving the benefits of competition, such as value, choice, innovation and convenience, but we need to take appropriate action to address those areas where they could be served better and where their interests could be damaged in future. We have been very careful to ensure that our actions match the scale of the problems we have identified.’