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Supermarkets' land battles

• Robert Peston
• 31 Oct 07, 08:11 AM

The big supermarket groups have given new meaning to the retailers' axiom that their business is all about property and location.

has found evidence that they buy up land around superstores as a defensive barrier to prevent rivals muscling in on their territory.

It is a way for the Big Four supermarket groups - led by Tesco - to acquire and retain a lovely huge local market share.

Here are the numbers. There are 187 stores owned by one of the Big Four - that's Tesco, Asda, Sainsbury's and Morrison - which have more than 40 per cent of all retailing floorspace within a 10-minute drive-time. Or to put it another way, there are 187 supermarkets with massive local market shares.

Now in these 187 supermarket fiefdoms, the commission says that "110 landsites associated with 105 different stores are a cause for concern in terms of their ability potentially to constrain entry by a competing retailer". In other words, a supermarket group is typically sitting on a precious piece of land near an existing store and doing nothing much with it, largely to prevent a competitor building on it.

And that's not all. The commission says it has unspecified concerns about a further 54 controlled landsites in these areas.

It certainly looks like anti-competitive behaviour on a magnificent scale. And the supermarkets use all the tricks in the book to control the relevant land: exclusivity arrangements, restrictive covenants, leases to friendly third parties and so on.

The commission is proposing two remedies, neither of which will appeal to Tesco et al. It wants to force retailers to sell land in areas where there are few superstores, and it wants to prohibit retailers from using covenants or exclusivity arrangements that would prevent land being snapped up by a competitor.

All of which sounds quite right, except that some people will not like the wider context in which the commission is planting these recommendations.

That context is that it believes that too few of us have a proper choice of superstores, that for the market to function well we should all have easy access to three or at least two of these vast barns of groceries and consumables.

So it wants the planning system changed to provide greater opportunities for edge-of-town developments. And it suggests there should be a new competition test that would allow any planning decision to take account of whether any local retailer has become too dominant.

In other words, as I wrote here yesterday, it thinks the UK could benefit from having a load more superstores. Not everyone will concur. Do you?

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