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LONDON, July 31 (Reuters) - Britain's advertising watchdog ruled in favour of supermarket leader Tesco in a spat over price comparisons with third-largest J Sainsbury, which reacted by launching a campaign to emphasize product quality.
Britain's supermarkets, despite their focus on essential goods, are battling intensely for market share as the economy has been sluggish. Advertising is a major battleground.
The Advertising Standards Authority (ASA) said on Wednesday it had decided not to uphold Sainsbury's challenge to Tesco's "Price Promise" campaign.
Tesco launched "Price Promise" in March, comparing the overall cost of a basket of its branded, own-label and fresh food against the same or equivalent products from Sainsbury's, Britain's second-largest grocer Wal-Mart's Asda and fourth-largest Wm Morrison.
If the comparison shows the basket would have been cheaper at a competitor, Tesco automatically issues a coupon for the difference up to 10 pounds ($15.40) when customers receive their shopping receipts.
Sainsbury's alleged that Tesco's advertised claim that "You won't lose out on big brands, own-label or fresh food" was misleading in relation to the own-label and fresh food items, because it did not take into account product attributes such as provenance and ethics.
It argued that comparing products such as Tesco's non-Fairtrade bananas with Sainsbury's Fairtrade bananas or Tesco's Everyday Value ham, which is produced in the European Union, with Sainsbury's basics ham, which is British, was unfair.
The ASA ruled, "While we acknowledged there would be differences in animal welfare and country of origin for the ingredients, we were satisfied that Tesco had taken those elements into account when identifying and matching products and had compared on the basis of them meeting the same need."
Tesco's UK marketing director, David Wood, said the ASA's verdict vindicated the retailer's decision to "go the extra mile for customers" and offer a price-matching scheme based on a full basket of shopping.
Sainsbury's, whose "Brand Match" scheme compares the prices of branded products only, said it had yet to decide whether to appeal the ASA ruling.
Its immediate reaction was to launch a "Same price, different values" print advertising campaign across national media.
"If there's one big lesson that we should all have learned from the horsemeat scandal, it's that customers care deeply about where their food comes from and how it is produced," said Mike Coupe, Sainsbury's commercial director.
Unlike Tesco and Asda, Sainsbury's was not implicated in the horsemeat scandal. None of its products testing positive for equine DNA.
The advertising spat is the latest in a long list of disputes between the two grocers.
In January, Sainsbury's accused Tesco of being "a bit disingenuous" in headlining its Christmas trading statement with a figure that included sales activity related to coupons.
Though Tesco overtook Sainsbury's at Britain's No. 1 retailer in 1995, Sainsbury's has performed better of late.
Tesco issued its first profit warning in over 20 years in January 2012, while Sainsbury has posted 34 consecutive quarters of like-for-like sales growth.