Tesco was served with legal papers last Friday due to a violation of its agreed competition law.
Property developer High Peak Developments is suing the Big Four grocer as it claims Tesco has participated in illegal activity by refusing to release a protective agreement on land surrounding its Whaley Bridge store in Derbyshire.
The site was first purchased from High Peak Developments in 1997. Following its purchase, Tesco ensured that an agreement was made that prevented surrounding land from being used for the sale of food, convenience goods and pharmacy products.
Nonetheless, the grocer is now being charged for turning back on its agreement to release the initial competition covenant.
High Peak signed a conditional agreement with B&M Bargains last July. The discount retailer was to build a new store on the developer’s land if Tesco released its protection contract. Tesco was paid for the release and solicitors from both sides were in discussions the following month.
Three months later, however, Tesco refused to discharge the covenant, leaving B&M unable to go ahead with its store plans.
“Our client firmly believes that Tesco has taken an anti-competitive stance”, said Gareth Birch, Solicitor at Pannone Corporate, representing High Peak.
The case’s regulator highlighted that “grocery retailers are engaging in land-banking as a strategy to impede the entry by rival retailers into local markets”.
While restrictive covenants had been normal procedure in the 1990s, the Competition Commission ordered the deletion of certain clauses in 2010.
“We have been in commercial negotiations about a site next to our Whaley Bridge Superstore and remain willing to continue these negotiations to reach a mutually acceptable agreement” said a Tesco spokesman.