Tesco to deny domination of food and seafood market Published: 02 April, 2007
SUPERMARKET giant Tesco will today hit back at allegations that it is dominating the UK food and seafood markets – worth an estimated £120-billion a year.
Britain’s biggest store chain will tell the Competition Commission, which is looking into the retail business, that it does not have a stranglehold over consumer choice, as some of its critics have been suggesting. However, in a submission to the industry watchdog, it is expected to criticise the way that “local” has been defined.
Tesco confirmed reports its argument would include findings that customers spend up to 30 minutes driving to the supermarket of their choice. This compares to the 10 to 15 minute drive criteria used by the commission.
Tesco has compiled its evidence from research, which it says can identify the habits of marginal shoppers. As well as finding customers defining trips of up to half an hour as “local”, it also showed that even small price rises could cause shoppers to switch stores. This suggested the market was already “fiercely competitive”, the submission will say.
Tesco’s director of corporate and legal affairs, Lucy Neville-Rolfe said it was hopeful the results would have an impact with the watchdog. “We have submitted a serious economic proposition. We hope that the evidence we have submitted will force the commission to review its definition,” she said.
In its 28-page response to the commission, Tesco is saying: “It is not credible … to suggest that a grocery retailer could become so entrenched in a local area as to make that area incontestable by others.”
Tesco will argue that virtually every British consumer enjoys healthy choice. And it will say that the planning system, far from inhibiting supermarket growth, has enabled 600 new stores to be built by the sector in five years since 2000. The document comes as many analysts predict that the commission will check the supermarket’s expansion and prevent more so-called Tesco towns – such as Inverness where it collects 52p in every £1 spent – by introducing a competition test that will benefit store chains not already operating in the area.
The commission is probing whether Tesco, Sainsbury’s, Asda and Morrisons – which control almost 75% of the UK market including fish and seafood, are abusing their position by limiting consumer choice. Firms found to have an anti-competitive hold on the market may be forced to sell off stores.
Meanwhile, Tesco rival Sainsbury is expected to receive a £10-billion private equity bid this week. The bidders, led by CVC, will pitch their conditional offer at between 570p and 580p a share. The bidding consortium, which also includes Kohlberg Kravis Roberts, Texas Pacific Group and Blackstone, has spent the past few days thrashing out a deal with Sainsbury’s pension fund trustees. The two sides have been arguing about the supermarket giant’s pension fund deficit, put at between £400m and £3bn.
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