In a CMA probe that’s been rumbling along for three years, Sainsbury’s and Asda yesterday became the latest supermarkets found to have breached competition rules in land agreements.

It stems from the Competition & Markets Authority looking into supermarket property deals to establish whether they contain restrictions preventing rivals from opening nearby.

The probe kicked off in 2020, when the CMA wrote to a number of major supermarkets asking them to show they were not breaching competition rules, after finding Tesco had been. Sainsbury’s and Asda join Waitrose in subsequently having been exposed as also breaching the rules.

The CMA said yesterday that by enforcing the Groceries Market Investigation (Controlled Land) Order 2010, it was “ensuring shoppers have more choice and so benefit from a wider range of groceries and access to cheaper prices – which is even more important as the cost of living rises”.

But the 2010 Controlled Land Order (CLO) is limited in its ability to guarantee that protection for shoppers. For one thing, it applies only to new property agreements struck since the order came into force (in 2010). Since supermarket leases are typically 25 years in duration, many will be outside the scope of the rules.

For another, the CLO applies only to Tesco, Sainsbury’s, Asda, Morrisons, Waitrose, M&S and the Co-op, and not Aldi (now the UK’s fourth-biggest supermarket) or Lidl. That’s because the 2010 order stemmed from a market investigation launched four years earlier, in 2006, when Aldi and Lidl were too small to be deemed inclusion-worthy. The CMA has argued it cannot unilaterally broaden the scope of the order to include additional retailers without carrying out a further market investigation.

Mults raising objections to new discounter stores

In fact, Aldi and Lidl are said to be disinclined to resort to restrictions that would be prohibited by the order. With both taking hard-pressed shoppers from traditional droves in the cost of living crisis, a greater concern might be any way the mults can still stop them from trading nearby. For example, by raising objections or seeking judicial reviews in response to their plans for new stores.

In December last year, The Grocer revealed 37 proposed new Aldi stores across the country were being held up by planning objections or judicial reviews raised by rival supermarkets. Lidl’s new store plans had been subject to 87 objections, eight pre-action protocols and four judicial reviews raised by competitors since 2020.

Aldi missed its target of having 1,000 UK stores by 2022 – with its UK & Ireland CEO Giles Hurley blaming delays in securing planning permission as a key reason. Aldi now expects to reach the landmark later this year.

The supermarkets behind the objections, including Tesco and Asda, maintain they only raise them based on material planning considerations, such as impact on the environment, and never on the basis of loss of trade, or simply to delay.

Local councillors seeing the plans repeatedly return for reconsideration over months or years have not always sympathised.

‘Behaving like gangsters with deep pockets’

In October 2021, as an application for a Lidl in Gillingham, Kent, was approved for the fourth time, Cllr Martin Potter accused Asda of “behaving like gangsters with deep pockets trying to run their rivals out of town, not dissimilar to the Las Vegas mobsters who tried to keep their rivals off the strip back in the day”. 

Cllr Stuart Tranter observed: “There might be a few cynics in the world that would think that Asda’s objective here was something to do with their own competitive position rather than the flood risk to the good people of Medway.

“I feel very comfortable in supporting this application and I very much hope we don’t hear from Asda again.”

Aldi and Lidl’s combined market share has risen from 15.9% to 17.8% in the past year [Kantar 12 w/e 14 May 2023]. Yet many consumers will still be waiting for one to open in their area.

Given the CMA’s determination to ensure shoppers can access cheaper groceries in the cost of living crisis, we might at least expect its curiosity would be aroused by the competitor objections lengthening that wait.

As for future anti-competition issues, the CMA said it carefully monitored the market but could not speculate as to which matters may or may not be investigated going forward.