The commission had planned to implement a rule banning supermarket chains from opening new stores in areas where their market shares are already too large.
However an appeal against the proposed rule by Tesco was upheld, raising fears that the supermarket's growth will be allowed to continue unabated.
Tesco already has a 30 per cent share of the UK food market. Campaigners said that the successful appeal by the retail group could lead to the continued spread of so-called Tesco Towns, such as Inverness, where over half all money spent on food and drink is spent in a Tesco.
"This green light for further Tesco dominance is a disaster for consumers, local shops and the environment," said Helen Rimmer, a spokesperson for Tescopoly, a pressure group.
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