Regulator backs grocery competition test

LONDON (Reuters) - The country's competition regulator defended plans for a new test for supermarket groups on Thursday, saying its proposals could yield 1.9 billion pounds of benefits to consumers over 25 years.

The Competition Commission (CC) concluded in April 2008 that action was needed to improve competition among supermarkets in a number of local markets and proposed a new test for planning decisions on larger stores.

The test would apply to new or extended stores of over 1,000 square metres. It would examine the number of competitors within a 10-minute drive time and aim to ensure no single retailer had more than 60 percent of grocery sales in that locality.

An appeal against the decision by Tesco (TSCO.L), the country's biggest retailer, was upheld by the Competition Appeal Tribunal (CAT) in March, which said the CC had not properly assessed the costs of the test and had failed to address its proportionality and effectiveness.

The CC said on Thursday it had conducting a detailed analysis which compared the benefits of increased competition against the costs from any delay between a dominant retailer's development being blocked and a rival taking its place.

"The analysis concluded that over the longer term, the benefits to consumers would outweigh any such initial costs," it said in a statement.

Using a net present value model to estimate the benefits and the costs, the CC concluded that the benefits arising from the test could total 1.9 billion pounds over 25 years.

Tesco said the proposed test would not help consumers.

"We are concerned that the CC findings rely heavily on far-fetched assumptions which don't reflect the reality of the planning system," it said in a statement.