So just how local is local? This is the question Tesco posed once again this week when it stepped up pressure on the Competition Commission to ditch the market definition it has been using and accept that competition should be measured on a national, not local, basis.

This is not the first time Tesco has called for the local market definition to be reviewed. So how credible is its argument this time around and, more importantly, will the Commission take any notice?

Currently in the midst of its third investigation in six years into local competition, the Commission has so far based its arguments on the 10-15 minute drive time definition. Tesco, however, is pushing a 30-minute drive time in a bid to steer the Commission away from considering competition in local markets and to demonstrate that the grocery market should be considered on a national basis.

In its 28-page response to the Commission's Emerging Thinking, Tesco says the Commission's definition of local is up to three times smaller than it should be and the 10-15 minute definition on which it is based should be widened to 30 minutes. It is basing its case on the highly technical SSNIP test, which identifies where a dominant retailer can raise prices profitably and can be used to measure competition by identifying the habits of marginal - or floating - shoppers (see box). Tesco argues that if a retailer were to apply a 5% price increase to a store that enjoyed a hypothetical monopoly within a 10-minute drive time, marginal customers - ie those willing to shop elsewhere - would migrate to other stores outside the zone.

Using this model, Tesco claims its stores are actually competing with grocers within a 30-minute radius of its stores, and customers at 90% of its stores above 14,000 sq ft would have a choice of 23 other stores. This is six times more than required for a local market to be deemed competitive.

The 30-minute drive time definition is a key weapon in Tesco's campaign to prove the grocery market is effectively national, not local. The UK's largest retailer has almost 1,800 stores nationwide and it fears the current local market definition will mean it will have to divest stores.

Yet critics have slammed Tesco's proposal, saying it relies too much on fancy mathematics and ignores crucial facts about local markets. Anyone accused of having a dominant market position would try to argue for the local definition to be widened, they add.

"The SSNIP test is a blunt instrument because it fails to take account of different types of consumer," says James Lowman, chief executive of the ACS, pointing out that the whole model is based on drive times.

"The most recent data from National Statistics shows that in Great Britain 27% of households do not have car access. It would not be right for this inquiry to ignore large numbers of consumers."

Ojay McDonald, marketing and communications coordinator at the Retail Enterprise Network, agrees. "Even the current Commission definition of 10 to 15 minutes' drive time is unacceptable because so many consumers don't have cars," he says. "Tesco's proposal is even worse."

Whether people have cars is not the only issue. "Just to think about retail drive times is to avoid dealing with a lot of important issues about sustainability, thriving towns and transport," says Rynd Smith, head of policy at the Royal Institute of Town Planning. "It's crude. To attempt to reduce consideration of what the market catchment can be to such a test as SSNIP is reductionist and verging on dangerous.

"There's incredible diversity in the retail sector. You need to consider issues such as the viability of towns, the effects of retailing and, not least, customers who don't or can't drive and who are often the most disadvantaged."

The use of simplistic methodologies has been a weakness in past investigations, adds Lowman. "This led to the two-market definition and several anti-competitive acquisitions," he says. "We are making it clear to the Commission that it must not make the same mistake this time. If the Commission is serious about looking at local markets and assessing the choice available to the full breadth of consumers, then it must reject Tesco's simplistic analysis. This inquiry has to expose the long-term problems and act to promote a level playing field and truly competitive market."

Tesco, however, berates the regulator for ignoring so-called marginal consumers. "We consider that, in previous inquiries, the Commission's approach to geographic market definition was overly simplistic," it says in its submission. "Previously, it has defined grocery markets by reference to how far 'most consumers' are prepared to travel. Markets should be defined not by reference to the majority of consumers, but by reference to marginal consumers, namely those who are most willing to switch between retailers."

The Commission will publish fresh analysis bearing on the definition of local markets next week, although it says its overall position will not change. "It's related thinking," adds a spokesman, "not a riposte to Tesco."

The final inquiry report is due in November. Despite Tesco's best efforts, the Commission is expected to stick to its historic definition of a local market. "Tesco's proposal comes as no surprise but I doubt the Commission will be swayed," says Andrew Wade, retail analyst at Seymour Pierce. "The Commission has already shown it won't let people play games with it, and I don't think in the end that it matters what the big players in grocery think. It won't be swayed."n