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Supermarkets' land holdings to come under Competition Commission scrutiny

LONDON - The Competition Commission is to investigate the undeveloped land owned by the big four supermarkets and the effect strict town planning rules have on stopping rivals opening competing stores.

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The Office of Fair Trading has listed these concerns among others after listening to 1,200 responses from a public consultation following its decision in March to refer the groceries market to the Competition Commission.

Although there have already been two commission investigations into the sector in the last five years, the focus on land holdings and planning permission system for new stores is fresh.

Although the OFT said the commission would be not be limited to considering these issues, three out of the four points it raised related to land.

Tesco in particular is at risk from regulatory action because it is believed to have the largest bank of land for future store development. According to documents given to The Sunday Times last September, Tesco owns 185 development sites that could create 4.5m square feet of store space.

In its statement, the OFT said it has evidence suggesting that the planning regime acts as a costly barrier to entry, making it difficult for new stores to open and compete with those already in the market.

It also said that big supermarkets have significant land holdings that could aggravate barrier to entry or otherwise harm consumers. In addition, it said that in some instances, supermarkets have attached restrictive covenants when selling sites.

The fourth point it raised was that it had evidence that the big supermarkets' buyer power has increased, and that some aspects of their pricing behaviour, such as below-cost selling and price flexing, could distort competition.

John Fingleton, chief executive of the OFT, said: "This reference will allow the Competition Commission to examine in detail all aspects of the grocery sector, ensuring that consumers are able to benefit from strong competition through even lower prices, improved quality and choice, and continuing innovation in the
market."

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