“Come friendly bombs and fall on Slough! It isn’t fit for humans now”, was how the late poet laureate John Betjeman viewed this unassuming borough. There are doubtless some at Tesco headquarters who are now agreeing with the poet – or at least wishing they had never heard of the place.
That is because the supermarket behemoth has recently gotten itself referred to the Competition Commission, over and above its involvement in the current Grocery Market inquiry, as a result of a property purchase it made in Slough some three years ago.
The Office of Fair Trading has now referred Tesco’s acquisition of a big Co-operative Group store there in 2004 to the CC because it failed to meet an OFT deadline to divest the outlet to a suitable one-stop grocery provider.
From the point of view of the Federation of Wholesale Distributors and its independent retail allies, this is a very interesting development because it could prove to be the first test case for the CC’s new “local” market definition. And this could have a significant impact on the wider grocery market inquiry with all the implications this holds for wholesalers.
The background to the Slough referral is interesting in itself though. The OFT made its original reference decision in February 2004, but suspended its duty to refer the transaction while it sought to agree a clear-cut remedy with Tesco. This, says the agency poignantly, has not proved possible.
From the outset, Tesco undertook to transfer the Co-op site to a suitable one-stop rival, which would have restored grocery competition and consumer choice in Slough to their levels prior to Tesco’s purchase of the store. A series of planning issues delayed matters until in March 2006, when consent for redevelopment of the Co-op site was granted. After this, Tesco reassured the OFT at various times that it was actively marketing the site and was confident of finding a purchaser. By January 2007, however, the OFT had serious concerns and called a meeting at which Tesco could not name a credible candidate purchaser. The OFT therefore set a final deadline for Tesco to come up with a buyer and so avoid the need for a full CC inquiry.
Because the deadline was missed, the matter now goes to the CC, which is expected to report on it by early October. An OFT spokesman commented, “The CC now has the opportunity to review the issues in-depth, alongside its ongoing inquiry into the grocery sector, and it has remedies options that have not been available to the OFT. A detailed inquiry by the CC will therefore be in the best interests of consumers.”