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News - 2 April 2007

Tesco gives Competition Commission lessons in maths and English

Supermarket giant Tesco has produced a defence to accusations it has a near monopoly of the UK grocery market and offers to show the CC how to do the calculations.

The Office of Fair Trading referred the grocery sector to the Competition Commission (CC) in May last year after evidence suggested some supermarket chains were abusing their size to stifle competition by pricing products below costs, and by hoarding “land banks” to stop rivals opening competing stores.

A hefty document presented to the Commission today insists that the CC have got everything wrong from the maths to the definition of "local"

Tesco maintain that the definition of “local market” should now be defined by a drive-time of up to 30 minutes, not the 10 to 15 minutes used by the Commission.

The supermarket argued that the grocery market was now "national" and not local as shoppers increasingly buy online and are prepared to travel further to visit a store.

Tesco said: "We do not vary our retail offer in line with levels of local competition. We and all the other major grocery multiples have national strategies on pricing, branding, advertising, quality, range and service."

"The way in which customers do their grocery shopping has changed. Customers are now doing different types of shopping trip in different types of stores - from farmers' markets to the internet - with the result that smaller stores now impose an even greater competitive constraint on larger stores."

Tesco challenges the Commission to use a research tool known by the acronym “SSNIP” (the small but significant non-transitory increase in price test), which it believes could dramatically alter the findings of the inquiry.

The Commission's initial "emerging thinking" document released in January identified 10 retailers that were selling below cost price one of which was Tesco, which has a market share in excess of 31%

On the issue of so-called land banks, it blamed the difficulty experienced by some players in entering markers on the planning system, which it said needed to be faster and more efficient.

The Commission is set to publish preliminary findings in June, with a final report due in November.

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