Preventing a popular company from growing is an odd way to serve the consumer, but that is what the Competition Commission is doing in restricting Tesco’s expansion to give less popular supermarkets a better chance to expand.

The competition regulator is recommending that planning permission for new or expanded stores take account of whether rival retailers are present in the area. That the other grocers may have chosen not to trade in that location is neither here nor there: the watchdog is worried about local dominance.

Tesco, with 31 per cent of the grocery market, will be hardest hit because it starts with more stores than Asda, which has a 17 per cent share or Sainsbury, with 16 per cent. The ‘local competition rule’ emerged last year from the two-year inquiry into the grocery sector and the market leader has already invoked the appeals process, but with little success.

Told to rethink the rule, the regulator has decided to keep it with only minor amendment. Government must decide whether to implement it, however.

And government should not do so. Supermarkets are possibly the most cut-throat sector in the UK. Although four companies account for 75 per cent of sales, the competition is intense – unlike, for instance in other industries like banking or petrol sales that have a similar concentration among a small number of suppliers.

It is also a well-capitalised industry that presents no barrier to expansion. Despite Tesco’s market share it is a corporate tiddler compared with Asda,  a subsidiary of America’s Wal-Mart. If the rivals want to grow they can: they do not need a government body to hold back the successful. Even Waitrose and the Co-op, outside the Big Four and not quoted, have shown themselves able to expand aggressively.

Further, Tesco is not market leader because it has more outlets than its rivals; it has more stores because it has greater sales. It is Number 1 because the public chooses it. Most shoppers have a choice of supermarkets and most choose Tesco.

Things can change. Tesco could easily lose its crown by letting standards slip or failing to identify consumer demands. Rivals can exploit a niche that the market leader misses. But until then, how does it help competition to tell the residents of a town who want a Tesco that they cannot have one?

There is vociferous anti-Tesco feeling in some towns. That’s fair enough, but if those people don’t want to shop at the store they should not prevent others doing so. If Tesco opens in a town where no one wants to use it, that is its risk and its loss.

But the Competition Commission really has lost its way on this draconian policy. If it applies it to supermarkets why not apply it to pubs, banks, garages or any another chain? Telling people they cannot have their favourite store is not serving either the customer or competition.

Share this: