The Competition & Markets Authority is bound to uncover more cases of supermarkets with so-called “unlawful” land agreements, retail property experts have claimed.
The CMA last week slammed Tesco over 23 land agreements restricting rivals from opening nearby, in breach of competition rules. The authority has written to the other supermarkets covered by the rules - Sainsbury’s, Asda, Morrisons, Waitrose, M&S and the Co-op - demanding they show their land agreements are not in breach.
The competition watchdog has threatened enforcement action against retailers who do not comply and called on the government for powers to impose fines for future breaches.
But according to top retail property agents, breaches are bound to be found because of the size of the estates and prevalence of the restrictive clauses before they were banned in 2010.
“They will all have not dissimilar situations [to Tesco],” said Richard Curry, partner in retail and leisure at agents Rapleys. “It was fairly commonplace and these were legal contracts so it’s quite a difficult thing to undo.”
Tesco responded to the CMA’s attack by pointing out the 23 breaches represented 0.4% of its 5,354 land deals. The supermarket has blamed “administrative errors” and agreed to take remedial action in all the cases.
Tom Edson, head of retail capital markets at Colliers, said the CMA’s probe was likely to uncover breaches at other supermarkets on a similar scale. “These supermarket operators still own vast swathes of land and a lot of costs and time are involved in managing these assets,” he said. ”It’s a huge estate and unfortunately something will fall through the net.
“I would expect as the CMA look they will find examples at the other supermarkets where something has been missed.
“On restrictive covenants that may have been agreed 20, 30, 40 years ago, unless they’re going through all the legal documents back to conception, it will get missed.
“They don’t have a magic book which lists of all the properties with these clauses.”
Announcing the action last week, Andrea Gomes da Silva, CMA executive director, market mergers, said: “It’s unacceptable that Tesco had these unlawful restrictions in place for up to a decade. By making it harder for other supermarkets to open stores next to its branches, shoppers could have lost out.”