Regulators will look at whether firms charge different prices locally

With firms such as Tesco selling more non-food goods, some groups have called for these to be part of the inquiry.

But the watchdog said it would limit its investigation into competition among supermarkets to sales of food, drinks, toiletries and household goods.

Issues to be examined include local competition and land purchases.

Supplier livelihoods

The Office of Fair Trading referred the �120bn supermarket sector to the Competition Commission in May, amid claims that top supermarkets had become too powerful and smaller stores were being squeezed out.

In a statement, the Competition Commission said its inquiry would focus on issues directly linked to competition in the industry.

Subjects it will consider include whether fierce price competition among retailers is threatening the "economic viability" of suppliers.

It will also examine whether supermarkets have become too dominant in town centres in certain parts of the country, after buying up smaller convenience stores.

Market entry

The controversial subject of land banks - plots of land which supermarkets acquire for future developments - will also be looked at.

The watchdog said it would examine whether retailers were buying land "in a way which serves to exclude or deter actual or potential competitors from entering a market or expanding their operations".

But issues such as the environmental impact of the retail supply chain, rural land usage and general competition on the High Street will not be considered unless they directly affect grocery competition.

The regulator plans to start hearings next month.