There has been broad support for last week's recommendation by economist Peter Bacon that the Government cap on the size of supermarkets is anti-competitive and against consumer interests. Predictably, RGDATA is opposed to any easing of the restrictions.

The report, titled Competitiveness of Retailing in Ireland in an International Context and commissioned by Tesco, found that Government limitations on the size of stores are impeding competition and growth in the sector.

The report said that besides impinging on the competitiveness of the sector, the restrictions on the size of retail outlets has been adjudged by the Competition Authority to be anti-competitive and not in the best interests of the Irish consumer. It suggested that a more balanced and equitable solution would be to accommodate non-food retail space outside the cap limitations.

Industry experts also believe that the current restrictions will hamper the future development of the retail sector in Ireland. Aidan O'Hogan, managing director of agent Hamilton Osborne King, said the cap has had an impact on the decision of a number of international firms not to open outlets in Ireland, where the planning process is seen as "difficult and prolonged". These firms were instead opting for new emerging markets in Eastern Europe, depriving Ireland of inward investment.

Under the planning regulations, planners do not grant permission for grocery outlets over 35,000 sq ft in Dublin and 32,000 sq ft in other areas.

"When one takes a mature and developed market such as Ireland's grocery sector, the imposition of an arbitrary optimum size of store would appear to be unnecessary," says Stephen Murray of Jones Lang LaSalle. "The key determinant should be consumer need and what is considered to be the proper planning and development for individual locations in a free market. It is unlikely that market demand would support a significant number of stores greater than 35,000 sq ft, but there would be individual locations where this would be the case." A number of the larger British retailers, like Sainsbury and Safeway, were once reported to be interested in establishing a presence in the Irish market, but the introduction of the size restrictions is thought to have persuaded them to develop elsewhere. Once their plan to open two large superstores in key areas became a non-runner, the alternative was to develop a network of stores to produce worthwhile returns.

RGDATA, the lobby representing small retailers, criticised the Bacon report, saying that it was self-serving and displays an appalling lack of understanding of retail planning. It said the best thing that could be said about the report was that at least Tesco was now using more sophisticated methods to try and influence the Government on the issue. Their claims about lowering prices if superstores were allowed were unsustainable. Meanwhile, Superquinn favours open competition and much less restriction in the grocery market. Managing director Fergal Quinn said that while he did not support the size restriction, he recognised that the Government had to make a decision on the issue. He would prefer to see legislation that had a pre-determined life cycle so that it could be looked at again in a set period of time and left to wilt naturally if the market so decided.

HOK's Aidan O'Hogan said that putting controls and interfering with the already lengthy planning process did not benefit the consumer. "While we have a very buoyant market at present, there may be a time in the future when we will need inward investment, and the problem with imposing controls like this is that they tend to stick," he said.

The Bacon report found that modern retail supply chains could create significant savings and lower consumer prices in larger stores, while the Groceries Order, which forbids below cost selling, also restricts competition.

"The limitations on size of shops has been adjudged by the Competition Authority to be anti-competitive and not in the best interests of the Irish consumer. Reliance on smaller stores will have consequences in terms of creating more urban sprawl, failure to meet consumer shopping needs and will negatively impact prices charged to consumers. Larger stores, particularly those over 32,000 sq ft, are less costly and more economic to operate and can therefore assist with lower prices to consumers and reduced inflationary pressures while also meeting the needs of a growing number of consumers," the report said.

The Competition Authority champions the right of consumers to cheaper goods and argues that competition would help, rather than hinder, the long-term development of the Irish retail trade. Many of Ireland's long established retail stores are well in excess of current limits, including Dunnes Stores in Cornelscourt in Dublin, with 53,819 sq ft and a 75,000 sq ft outlet in Ballyvolane in Cork. The Tesco outlet in Tallaght has 48,400 sq ft. Tesco had planned to open a number of large stores before the planning restrictions were introduced.

Bacon noted that in recent years, the grocery sector has expanded to include many non-food products that were once carried by a wider range of outlets. A more balanced and equitable solution, it suggests, would be to maintain the proposed restriction on food retail space of 35,000 sq ft in Dublin and 32,000 sq ft outside Dublin but within a larger retail centre.

The remainder of the space could accommodate non-food retailing, customer facilities, checkouts and non-retail circulation space. Aidan O'Hogan supports the notion that the current cap should not apply to the broad range of services in supermarkets.