Aldi and Lidl ‘could challenge new competition restrictions on property deals’

Aldi and Lidl could challenge the CMA if it tries to slap new restrictions on their property deals, according to a leading food & drink lawyer.

The two discounters are currently exempt from a 2010 order that bans seven other major supermarkets from striking land deals that block rivals from opening nearby.

All seven of the supermarkets covered – Tesco, Sainsbury’s, Asda, Morrisons, M&S, Waitrose and Co-op – have been named and shamed by Competition & Markets Authority in the past five years for breaking the rules.

The CMA said this week it was “aware of concerns that the order should cover more supermarkets, due to changes in the groceries sector”, and was keeping the matter under review “to ensure a level playing field”.

The regulator has the power to designate additional retailers to bring them within scope, if they meet criteria set out in the order, which followed a groceries market investigation that concluded in 2008.

However, Mark Jones, partner at law firm Gordons, said Aldi and Lidl could argue they do not meet the criteria, which includes selling “a full range of groceries”.

“The 2008 investigation said Aldi and Lidl carried 1,000 to 1,400 SKUs, and that wasn’t a full range and the rules shouldn’t apply to them,” he said.

“So a court could say, if 1,400 SKUs wasn’t enough in 2008, where is the line? Is it 1,500? 1,600? And why?

“If I was acting for Aldi or Lidl, what I would probably be saying is data shows that most people who shop at our stores also shop at one of the multiples, so the logic that applied then still applies now.

“Yes, we might have increased the range but people still don’t see us as the full range.”

Aldi is thought to now have about 1,800 SKUs and Lidl up to 2,300, with seasonal variation.

Jones said it would “make commercial sense” for Aldi and Lidl to want to retain the power to put clauses in land deals blocking each other from opening stores near their own, or on a freehold site they were selling – an ability they would lose if added to the order.

Neither discounter provided a comment.

Iceland executive chair Richard Walker last year accused Aldi and Lidl of “preventing competition on retail parks” by using restrictive clauses in property deals.

In 2020, the CMA found Tesco had 23 breaches of the rules in its land deals, and as a result wrote to the other supermarkets covered by the order asking them to review their property agreements for similar breaches. Over the five years since, the action has brought to light 55 breaches by Morrisons, 18 by Sainsbury’s, 14 by Asda, 10 by M&S, seven by Waitrose and, most recently, 107 by Co-op. In each case the retailer agreed to rectify any outstanding breaches.