Supermarkets face tougher scrutiny of expansion plans and relations with their suppliers after the country's competition watchdog announced the outcome of a two-year probe into the sector on Wednesday.

However the Competition Commission, confirming its provisional recommendations from February, rejected calls that the biggest supermarket group, Tesco, should be forced to sell off stores or some of its land bank.

The four top supermarket groups, Tesco, Wal Mart-owned Asda, J Sainsbury and Wm Morrison, account for about 65 percent of the country's 120-billion-pound a year grocery industry, with Tesco making up by far the largest proportion.

This has led to calls from smaller businesses for the power of the "big four," and Tesco in particular, to be reined in.

The Competition Commission said it had found evidence that competition was not as strong as it should be in some local markets.

As a result, it said the government should introduce a "competition test" to assess whether supermarkets should be allowed to build new stores.

It also proposed a new, broader code of conduct covering relations between grocers and their suppliers and said this should be overseen by an independent ombudsman.

The inquiry, the third major investigation of the sector in eight years, is unlikely to end the regulatory uncertainty surrounding supermarkets, however.

The country's consumer affairs watchdog is investigating alleged price fixing of milk and cigarettes involving major grocers, and last week requested information relating to other products, signalling it may widen its inquiry.

The Competition Commission said it had not found compelling evidence of tacit coordination involving retailers and suppliers, but added that this did not rule out attempts at collusion, which the Office of Fair Trading is investigating.