Thanks to its ethical approach to business, The Co-operative Group is not usually seen as a villain. But that is what happened last week when Alan Beith, Liberal Democrat MP for Berwick-upon-Tweed, went public with his call for the Competition Commission (CC) to investigate the group on the grounds it has been establishing local monopolies by buying up rival stores with the sole intent of closing them.
So has The Co-op done anything wrong? Or is it a case of one rule for the big four and no rules for the rest?
Beith's constituents raised concerns when the group bought a Londis and a Spar, both in Northumberland, and then sold them with restrictive covenants in place, preventing their future use as c-stores. Another Spar, purchased last month in Rothbury, Northumberland, is also due to be sold with a restrictive covenant.
The group says it is protecting its business. "The convenience grocery sector has seen many new entrants in local markets in recent years, and it must be stressed that in these three locations we face direct competition from other local food retailers," says a spokesman.
It has also defended its use of restrictive covenants, arguing in last year's submission to the Commission that "given the predominant weighting of our grocery estate to stores below 750 sq m, we do not believe these covenants have posed a significant barrier to entry in the local markets."
But its use of them has raised questions about the ethics of such practices and prompted debate about whether retailers outside the top four in terms of market share should be subjected to the same level of scrutiny.
Though any retailer can attach restrictive covenants, if it has a significant market share their use could be deemed anti-competitive. "If one retailer was particularly dominant in an area and applied a restrictive covenant to a store, this could restrict other players from entering the market," explains one competition lawyer. However, if a lot of retailers were operating in an area, competition would be considered healthy.
The Commission won't comment on whether it plans to investigate The Co-op's use of restrictive covenants, saying only that it will be looking at the frequency of covenants, where and why they are used and whether their use could prevent competition.
However, to date, most of the focus has been on the activities of the top four. In referring the grocery market to the Commission, the Office of Fair Trading (OFT) found that 69 sites sold by the big four supermarkets since 2000 involved a covenant.
Since then, the Commission has revealed that 12% of all land sales by grocery retailers involved a restrictive covenant and that more than 50% of one unnamed retailer's land disposals had covenants attached.
Despite Beith's concerns, the combined grocery market share of all the co-operatives is just 5.4%, so The Co-operative Group is unlikely to be hauled over the coals in the same way as Tesco or Asda might.
The big four is certainly where pressure groups such as Friends of the Earth are focusing their attentions. "Yes, The Co-op is a key player but compared with the buying power of Tesco and the next two, we feel that the pressure of our work needs to be on them," says Vicki Hird, supermarket campaigner.
Even so, restrictive covenants remain controversial and, at a local level at least, The Co-op is already being called on to justify itself against accusations of monopoly. Time will tell whether the Commission shares Beith's concerns.n