Time to tame Tesco

WILL nobody tame Tesco? The march of this retail King Kong down the nation's High Streets knows no bounds. The news that Tesco now captures 13% of all British shopping and 33% of British groceries was greeted by the media with gasps of praise. Jack Cohen's old Edgware Road, London enterprise has become a global conglomerate. It is a success story. The Mini has become a Rolls, a Cadillac, a Mercedes, a Lexus.

I have a profound belief in two concepts. One is the free market and the other is the need to regulate it in the public interest. These concepts are compatible and should be kept in balance. In Tesco's case, they are out of balance.

Tesco is a great and glorious shop. I love it and use it. I admire the way its leadership, most recently under Sir Terry Leahy, took a jaded downmarket image and drove it past its rivals, not least the once-majestic Sainsbury's. The attention to quality was intense. There was bravura in the loss-leaders, from Tesco jeans to Tesco plonk. The move into financial services had panache.

So what is wrong with success? What is now causing concern over Tesco was said of Woolworths, WH Smith and Marks & Spencer when they were kings of the retail jungle. When Marks moved into food, it was accused of crowding out local grocers. When WH Smith cut the price of books it was damned for wiping out small bookshops. The marketplace has corrected their arrogance with a vengeance. They have all been humbled by Tesco.

But there is such a thing as too big. Tesco's lobbyists ensure that no planner dares object to its spreading hypermarkets over the countryside. In the Nineties, it moved into the High Street and opened Metros and Extras wherever it saw an opponent to crush. Two years ago it successfully induced that feeble regulator, the Office of Fair Trading, to allow it to gobble up 860 T&S stores. Last year it stuffed Europa, Cullens and Harts down its gullet.

The power that Tesco now exerts over suppliers and farmers is massive. It dictates not just the width of every cauliflower (five inches) and the taste of every strawberry (bland), but in doing so it standardises British produce as a whole. Not Brussels but Tesco fixes the British national potato and the national lettuce.

The key to its record £2bn profit lies not just in quality but in the battery of discounts, wastage rebates, gondola-end surcharges and financial penalties it imposes on its suppliers. Tesco's hard dealing is a legend among farmers the length and breadth of the land.

The company's prices are not particularly cheap. As yesterday's Evening Standard survey showed, its booming revenue depends on an ability to use sheer size to capture local spending power. Extensive loss-leaders and loyalty cards get people inside the stores and rely on 'inertial monopoly' to charge them above average for other goods.

Customers can, of course, go elsewhere, but when choice and convenience are so tightly controlled, they are easily dominated by bigness. Do we really want our main streets lined with nothing but Tescos, Oxfams and a handful of Patels?

I am sure that one day Tesco, like M&S, will decline. Its vast out-of-town hypermarkets will lie empty on the landscape, like the thousands of surplus Shell and Esso stations that have wrecked so many village streets and country roads and now lie derelict. The bad planning typical of John Prescott's pro-developer department merely leads to overcapacity. It floods the roads with cars and blights ever more countryside. In the High sSreet, Tesco's march towards monopoly merely limits choice.

We can all revolt. We can carefully shop at our 'locals', at Spar or Budgen or Londis or Shepherds, to keep them going as long as possible. But we should not have to do this to keep open consumer choice. As in all matters of planning, the public should be able to rely on regulation to maintain fair trade. Families, like defence procurers, need 'multiple-sourcing' for their own protection.

The rule of thumb is supposedly that a quarter of any definable market is enough to merit regulatory control. Tesco slipped through this net by arguing that High Street shops were not supermarkets. The OFT readily - all too readily - agreed with the absurd thesis that a local Metro had no more market power than Mr Grits the Grocer.

It ignored the many Tesco activities that clearly 'restrain trade'. These include its eagerness for local monopolies, its loyalty cards and the move into banking. In the last case, the huge profits allowed (by regulators) to British banks enable Tesco, if it chooses, to cross-subsidise all its retail prices from financial services.

Plenty of High Street markets are tightly regulated. Brewers may have protested at having 'guest beers' imposed on them, but drinkers like it. Pubs want longer opening hours (or some of them) but neighbours are entitled to stop them. Betting shops are rigidly controlled as to what they can display. Pavement cafes are a health-and-safety nightmare for cafe owners. There is no limit to what regulators can do when they choose.

So let them put a stop to Tesco's local expansion. Force it to disgorge Europa, Cullens and Harts. Give hard-pressed small retailers a break. Maintain the diversity that lies at the heart of a free market.