Tesco has won a key victory against the Competition Commission and its proposals to make store planning applications subject to a competition test. This is the first time that a party has successfully challenged a market investigation remedy before the Competition Appeal Tribunal ("the Tribunal") using the judicial review procedure in the Enterprise Act 2002.
The competition test was proposed by the Competition Commission following its two year investigation into the UK grocery sector. Its aim was to prevent local markets becoming highly concentrated (ie a small number of operators holding large shares of such markets) and the strengthening of existing market power.
Essentially, the test would have been implemented into the planning system obliging the local planning authority (with specialist input from the Office of Fair Trading) to consider the competition implications of the construction or expansion of a large store in a local market. In other words, the planning authority would have to assess the number of large stores operated by the retailer within a local market (together with its share of that market) and apply this against the test's very specific thresholds.
Tesco were, not unsurprisingly, opposed to the competition test. They argued that the construction or expansion of a large store would be in response to consumer demand in the local market in question. Accordingly, if the plans were blocked on the basis of the competition test, consumers would actually suffer as that demand would not be met. However the Competition Commission did not appear to have taken this consumer detriment into account.
The Competition Commission responded that, if an application were blocked for competition reasons, this would represent an opportunity for another retailer to enter the market and meet that demand. Crucially, however, the Competition Commission had not narrated and analysed this issue when proposing the competition test in its main findings.
The Tribunal agreed that it was not permissible for the Competition Commission to assume, without proper investigation and consideration, that no unmet demand would arise because another retailer would fill the void without significant delay. Accordingly, the Competition Commission had failed to consider particular matters which were relevant to its recommendation to impose the test.
Whilst the competition test will not be implemented in its current form, the Competition Commission may seek to revise the test in light of the Tribunal's comments. Indeed, the Tribunal did stress that it was not ruling on the principle of a competition test generally, but rather the lack of consideration of certain key issues in formulating this particular test.
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