UK supermarket group Tesco has been accused, along with three other retailers, of charging suppliers in exchange for selling their products in the group's supermarkets in Thailand.

Tesco and French giant Carrefour, which has also been accused, are among the few foreign retailers operating in Thailand, but already the new entrants control half of the market between them. Small domestic retail chains and independent stores complain that they have had to cut prices in order to compete.

Tesco's entrance into Thailand was part of its expansion strategy which is focused on Asia and eastern Europe. The company has increased its number of stores from 13 in 1998 to 38 currently open, with two or three more in the pipeline. Tesco has expanded much faster than its counterparts Carrefour and Casino.

The success of Tesco in Thailand is thought to be partly due to the stores' comfortable ambience and low-priced products. In the six month period ending June 2002, Tesco recorded sales of £401m (US$623m) in Thailand.

Only last week Tesco chief executive Sir Terry Leahy said that the company's international expansion was working well. Now it appears to have hit a setback. If found guilty of imposing charges on suppliers, Tesco Thailand and the other accused retailers - Carrefour, Casino and Siam Makro - could face fines of up to 6m Baht (US$138,300), and their directors could face up to three years in prison.

Tesco has denied the accusations, admitting that it charges suppliers for services such as the use of Tesco's central distribution system, but not simply for putting suppliers' products on its supermarket shelves.

This is not the first setback that Tesco has encountered in Thailand. Last December a rocket-propelled grenade was fired into a building which contained a Tesco store. Tesco's Lotus stores were also the target of several small bomb attacks, which are thought to be connected to a dispute over a security contract, reported The Independent. Tesco denies that this latest setback will affect its expansion in Thailand.