Traders in Abingdon are to report the Vale of White Horse District Council to the Local Government Ombudsman for its handling of Tesco's plans to expand its Marcham Road superstore.
The Chamber of Commerce said it was disappointed with the way planning officers handled Tesco's planning application at a meeting in May.
A consultants' survey showed that a bigger store would not cause significant damage to town centre trade, but district councillors deferred making a decision because of concerns by traders and Abingdon Town Council.
Chamber president, Jill Carver said: "After a review of all the documents and careful consideration of all aspects of the Tesco application we have decided to issue a formal complaint of maladministration against the Vale.
"Despite objections, numerous deviations from planning policies and a dubious report from an independent consultant, the officers recommended acceptance."
Chamber executive member Peter Tothill said: "A bigger Tesco would sell more non-food products and, what with free parking, town centre traders would come under enormous pressure in the fight for survival."
The Vale's strategic director Tim Sadler said: "The chamber has raised a number of complex points which need to be looked into carefully."
Mrs Carver added: "The council does little to preserve Abingdon other than tinkering at the edges.
"It has let the Old Gaol fall into disuse and decay and fails to take advantage of a fantastic river frontage."
Abingdon councillor Janet Morgan said: "I think the charge of 'tinkering at the edges' is a little rich given the work which has taken place in recent years. The Charter car park has been refurbished at a cost of £320,000 making it far better for visitors and a direct benefit to businesses.
"We are supporting with money the town council's plans for improving the Market Place and the major redevelopment of Abbey Meadows."
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