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Office of Fair Trading April 2011

Advice on the operation of the Test in Schedule 4 of the Groceries Market Investigation (Controlled Land) Order 2010. Office of Fair Trading April 2011. A cautionary note.

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Office of Fair Trading April 2011

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  1. Advice on the operation of the Testin Schedule 4 of the Groceries Market Investigation (Controlled Land) Order 2010 Office of Fair Trading April 2011

  2. A cautionary note What follows is advice and practical examples on how the Test in Schedule 4 of the Groceries Market Investigation (Controlled Land) Order 2010 works. This advice is not a substitute for the Order. Contact OFT for any clarification – see list of contacts at the end of this presentation

  3. Definitions used in this advice LGS = Larger Grocery Store (>1,000m2) Burdened Site = the site which is the subject of a Restrictive Covenant or an Exclusivity Arrangement as defined in the Order MGS = Mid-sized Grocery Store (280 to 1,000m2) Associated Grocery Store = An LGS or MGS within the 10 minute drive time isochrone around the burdened site and owned/ controlled by the large grocery retailer benefitting from the burden Fascia = the trading name under which a Grocery Retailer operates a Grocery Store For definitions of other terms see the Order

  4. Identify the exact location of the burdened site It has been assumed in all the examples that follow that the Burdened Site is not an LGS store or an MGS but just a vacant piece of land. Bear in mind though that it will count as a competing Fascia if it is an LGS or MGS Burdened Site

  5. Draw a 10 minute drive time isochrone round the Burdened Site Burdened Site 10 minute drive time isochrone Schedule 4, para 1(i)

  6. Identify any LGS or MGS owned or controlled by the Large Grocery Retailer (or a company under common control or ownership) which benefits from the Restrictive Covenant or Exclusivity Arrangement Larger Grocery Store benefiting from Restrictive Covenant or Exclusivity Arrange-ment Mid-sized Grocery Store benefiting from Restrictive Covenant or Exclusivity Arrangement LGS MGS Schedule 4, para 1(ii)

  7. Construct 10 minute drive time isochrones round each Associated Grocery Store Isochrone round MGS LGS MGS Isochrone round LGS Schedule 4, para 1(iv)

  8. If the Associated Grocery Store is a LGS, count the number of Fascias under which LGSs are operated within the Relevant Isochrone LGS LGS EXAMPLE 1: In this example there are 3 other LGS fascias, i.e. 4 in total so the Test is passed in this isochrone LGS LGS Schedule 4, para 1(vi)

  9. If the Associated Grocery Store is an LGS, count the number of Fascias under which LGSs are operated within the Relevant Isochrone EXAMPLE 2: In this example there is only 1 other LGS Fascia in this isochrone so 2 in total. Therefore, we must determine the groceries sales area of all LGSs only within the isochrone and work out whether the retailer benefiting from the Restrictive Covenant or Exclusivity Arrangement fails the Test by virtue of having a 60% or greater share of the groceries sales area within the isochrone LGS LGS Schedule 4, para 1(vi)

  10. If the Associated Grocery Store is a MGS, count the number of Fascias under which LGSs and MGSs are operated within the Relevant Isochrone EXAMPLE 3: In this example there are only 2 other fascias (3 in all), so we must determine the groceries sales area of all LGSs & MGSs together within the isochrone and work out whether the retailer benefiting from the Restrictive Covenant or Exclusivity Arrangement fails the Test through having a 60% or greater share of the groceries sales area within the isochrone Schedule 4, para 1(vii) LGS MGS LGS MGS MGS

  11. Note the following additional points for the purposes of the Test LGSs or MGSs (or a mixture of LGSs and MGSs) within the relevant isochrone and under common ownership or control will be considered to be operating under a single Fascia Any grocery store which has a Net Sales Area of less than 280 square metres is not relevant and therefore not counted (Schedule 4, paras (viii) to (xi) refer)

  12. OFT contacts for further information Bob MacDowall bob.macdowall@oft.gsi.gov.uk 020 7211 8574 Sharon Dias sharon.dias@oft.gsi.gov.uk 020 7211 8235 Natalie Lam natalie.lam@oft.gsi.gov.uk 020 7211 8129 Markets Policy and Remedies, Office of Fair Trading, Fleetbank House, 2 - 6 Salisbury Square, London, EC4Y 8JX

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