Britain's competition regulator is to investigate the country's £95 billion supermarket sector after a recommendation from the consumer affairs watchdog.
The Office of Fair Trading (OFT), which announced in March that it planned to refer the sector for investigation, confirmed today that the inquiry by the Competition Commission would go ahead and could take up to two years.
The OFT said there was evidence that big land-banks and the purchasing power of the big supermarket groups - Tesco, Asda, Sainsbury and Morrison - held back competition in the sector.
The Competition Commission could also go beyond the issues raised by the OFT, the OFT said in a statement.
"This reference will allow the Competition Commission to examine in detail all aspects of the grocery sector, ensuring that consumers are able to benefit from strong competition through even lower prices, improved quality and choice, and continuing innovation in the market," OFT chief executive John Fingleton said.
Britain's four big supermarket groups have a combined market share of 74.3 per cent, making it difficult for smaller rivals to break into the sector and also providing little incentive for a foreign group to enter the market.
But competition between the big four has been fierce, driving down prices.
Although this has eroded profit margins, making it even less attractive for potential new entrants to the market, it has also been good news for the consumer.
Analysts suggest this could make it difficult for the Competition Commission to justify action against the sector, particularly as the commission has said itself that it exists to protect competition and not competitors.