Competition bosses are likely to launch a full investigation into the market dominance of the UK supermarkets.
The Competition Commission inquiry is to be triggered by the Office of Fair Trading (OFT) after a further one month's consultation.
The OFT had been ordered by a tribunal to review a decision last year, when it decided against launching an inquiry, despite critics pointing the fact the big multiple were driving local convenience stores out of business.
The OFT said the big four supermarkets - Tesco, Asda, Sainsbury's and Morrisons - had built up their dominance of the food retailing business over the last six years, but added that prices had been falling and there was some evidence of increasing choice and improving quality, all of which, it said, was of benefit to consumers.
The OFT said there were some features of the grocery market which it suspected may be distorting competition and harming consumers.
In particular, it pointed to:
• the planning regime, which makes it difficult for new stores to open
• the big land banks of the largest supermarkets
• restrictions that some supermarkets put in place when they sell sites to other retailers.
However on the issue of whether or not supermarkets were driving out local or convenience store operators, the OFT said it has not yet reached a firm conclusion.
It claims the entry of the multiples into this line of business has been good for consumers.
But it also acknowledged that the buying power of the big supermarkets had increased, adding that the way they sold some goods - for instance at below cost - could be unfair to smaller rivals.
The OFT's chief executive John Fingleton said: "The convenience sector has changed rapidly and our provisional view is that it would be appropriate for the Competition Commission to investigate how that has affected consumers in local markets."
The OFT will consult further over the next four weeks, until 6 April, and then make a final decision on whether to refer the matter to the Competition Commission.
Kevin Hawkins, director general of the British Retail Consortium welcomed the OFT report: "Much of the content of this report is very favourable to supermarkets and acknowledges that competition has delivered major benefits to consumers. This is particularly obvious in the convenience sector where, as the report notes, the 10 per cent market share held by multiple retailers has greatly improved the quality of the offer to consumers.
“We also note the report’s concern about the planning system as a barrier to entry by smaller competitors into the sector. All retailers, however, are obliged to work within the system as it is, with all its imperfections, and the Competition Commission has on previous occasions declined to pursue this issue
“Should the enquiry go ahead, the supermarkets involved will of course, continue to extend the fullest co-operation to the Commission as they have nothing to hide. We would expect that the outcome of any enquiry will, yet again, confirm the benefits of supermarket competition to consumers.”
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