Reported on Fri, 10 Mar 2006

The UK's biggest supermarkets are muscling in on the territory of small convenience stores and distorting competition, claims the Office of Fair Trading (OFT), but a business loan could help smaller shops.

The OFT is concerned that the decision by Asda, Morrisons, Sainsbury's and Tesco to move into the convenience store market is bad news for consumers and has today published its consultation report on its concerns over the country's grocery industry.

However, the report reveals that convenience store sales have gone up over the last year despite the number of stores falling.

John Fingleton, chief executive of the OFT, explained that the watchdog was especially concerned about supermarkets monopolising land suitable for convenience stores to be built on, with the major retailers able to deny new shops from opening in certain areas.

He said that "restrictions in the planning system and the possible incentives those restrictions create for retailers to distort competition, may harm consumers and mean that competition in the market is less than it might otherwise be".

Mr Fingleton added that in light of the findings of the report, the OFT would be advising the UK's competition regulator that it investigate supermarkets' practices.

"The convenience sector has changed rapidly and given our evidence and the importance of this market for consumers, our provisional view is that it would be appropriate for the Competition Commission to investigate how that has affected consumers in local markets in terms of product variety and choice of fascia," he said.

The OFT report claims that the UK grocery industry is worth £95 billion annually, which accounts for 13 per cent of all household spending.

A low-rate business loan could allow existing or prospective convenience store owners to survive and expand in a potentially lucrative market.

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