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Regulator finds Tesco unlawfully blocked rivals from opening stores

Edmund Heaphy
Finance and news reporter
A Tesco store in London. The Competition and Markets Authority found against the supermarket giant on Friday. (Beata Zawrzel/NurPhoto via Getty Images)

The UK’s competition regulator on Friday said that Tesco (TSCO.L) had unlawfully prevented rival supermarkets from opening outlets close to its own stores.

The Competition and Markets Authority (CMA) said it discovered in 2018 that the UK’s largest grocery chain had prevented landlords from letting property to other supermarkets.

Not only could it have reduced competition and left shoppers “worse off,” the CMA said, but the practice is also unlawful under an order that it issued nearly 10 years ago.

Tesco was able to block rivals from opening stores near its own ones by introducing stipulations in land agreements, which in effect blocked landlords from signing leases with other chains.

Under the 2010 order, large grocery retailers are banned from preventing land being used by their competitors.

Following the CMA’s initial 2018 discovery, Tesco was asked to review its land agreements. It found 23 contracts — out of a total of its more than 5,300 agreements across the country — that breached the 2010 order.

Tesco, the CMA said, has now agreed to take “remedial action” for all of the affected agreements.

The supermarket will also improve its internal processes and staff training in order to prevent similar breaches from occurring in the future.

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“We do not use restrictive property agreements,” a spokesperson for Tesco said on Friday.

“However, in a small number of historic cases between 2010-15, administrative errors by former advisors meant that our internal processes were not followed correctly,” they said.

“As the CMA recognises, we have worked collaboratively in resolving this, and our voluntary review of 5,354 land deals found isolated issues in just 0.4% of these. We have since strengthened our controls and training, and are releasing the affected parties from all non-compliant terms.”

The CMA, however, said that it was “unacceptable” that Tesco had these unlawful restrictions in place.

“By making it harder for other supermarkets to open stores next to its branches, shoppers could have lost out,” said Andrea Gomes da Silva, the executive director of the CMA’s markets and mergers division.

“In the future, we want the ability to fine businesses if we find that they are in breach of our orders. That’s why we’ve called on the government for more powers.”

The CMA said it would also be writing to all other supermarkets bound by the order — Waitrose, Sainsbury’s, Asda, Morrisons, M&S and the Co-op — to ask them to demonstrate that their land agreements are not in breach of the 2010 order.

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