The chief executive of the north's biggest convenience store chain today hit out at competition chiefs for allowing supermarket giants to muscle in on the sector.

United Co-operatives chief executive Peter Marks said it was wrong that supermarkets and convenience stores are effectively regarded as different markets under competition rules.

It means giants like Tesco and Sainsbury have been allowed to buy-up convenience stores in addition to their supermarkets. Mr Marks, whose business owns nearly 500 stores in Yorkshire, the North West and Midlands, believes out-of-town superstores have already had a devastating effect on small towns.

Now he is concerned that the growth of those retailers in smaller stores will reduce customer choice further.

The issue resurfaced when Sainsbury's bought the Hull-based Jacksons Stores, which owns 114 outlets.

Mr Marks revealed that United, which is the UK's largest regional co-operative society with a turnover of more than £1.7 billion, had been keen to bid for Jacksons and was "disappointed not to have the opportunity".

But it was just the latest example of a trend as supermarkets, increasingly unable to find sites for new large stores, have looked at other expansion plans.

It began in 1994 when Tesco bought three stores; Sainsbury's got involved five years later when it launched its Local brand. In 2002, Tesco launched Express and, after acquiring T&S Stores last year, that company now accounts for more than 800 stores.

Bradford-based Morrisons has also become a significant player since buying Safeway, although it has admitted it is considering selling the smaller stores.

Mr Marks said today he was not afraid of competing with supermarkets but feared the effect on customer choice. He said United tried to encourage its store owners to be entrepreneurial while also benefiting from being part of a large organisation.

The supermarkets argue they need to enter the convenience market due to changing lifestyles which mean people have less time and cannot always visit large out-of-town sites. But Mr Marks said the only solution was for the competition authorities to look at the food retail market as a whole.

"The supermarkets are doing this because their ability to grow in terms of new supermarket outlets is restricted by problems such as planning," he said. "Supermarkets have killed a lot of small towns like Shipley, Brighouse and Cleckheaton which were once all thriving towns and now they are filled with charity shops.

"If they cannot continue to grow in that way then they will start to eat away at the small store market. Within a few years, there will be no choice for customers and the big four will totally dominate both sectors. But I am quite comfortable in competing with the big boys because we are very good at what we do."

James Lowman, of the Association of Convenience Stores (ACS), backed Mr Marks' comments. It is particularly concerned about large supermarket groups heavily discounting certain lines, such as bread, which hits independent stores that are unable to compete.

Mr Lowman claimed the Office of Fair Trading's view that there are two markets for 'top up shopping' (i.e. convenience stores) and 'one stop shopping' (weekly supermarket shopping) required a fresh look.

"We think that the way people shop does not reflect that," he said. "Fifty per cent of visits to supermarkets are for 'top up shopping'. We believe it is effectively a single market and that the OFT ignore the social aspect to this issue."

However, a spokesman for the OFT said that it had a "sophisticated and realistic approach to analysing the market" based on customer's buying habits. The current guidelines were drawn-up during a Competition Commission inquiry into the supermarket industry in 2000.

The spokesman said research showed that large supermarkets could not be competitively constrained by convenience stores and, therefore, there were distinct differences within the market.