The fair-trading regulator said planning restrictions prevent new retailers entering the market and hamper the expansion of existing ones.
It called for a change to the ‘needs test’, applied by councils, to “provide greater opportunities for developments on the edge of town centres”, though constraints on out-of-town retailing would stay.
The test allows councils to safeguard the economic health of town centres by refusing planning permission for major retail developments elsewhere if they judge this extra capacity is not needed.
According to the commission, the system favours large retailers because of the costs and risks of proving ‘need’ and of steering projects through the planning system and appeals.
“National grocery retailers with substantial experience of working within the planning process are in a much better position to mitigate or absorb these costs and risks compared with smaller [ones],” the commission said.
Planning Officers Society president Steve Quartermain urged the government to reject the Competition Commission’s recommendation.
“Government thinking indicates that it sees keeping the vitality and viability of town centres as key to the place-shaping agenda, and that should take precedence,” he said. “Edge-of-town developments should not be allowed at the expense of town centres.”
The Royal Town Planning Institute’s policy director Rynd Smith said the needs test had successfully protected the country’s town centres.
But British Retail Consortium director-general Kevin Hawkins said: “Councils are too eager to block suburban development and deny retailers sites. As a result, some communities often in deprived areas have limited access to a good quality supermarket.”