CMA Reviews Anti-Competitive Land Rules: Could Aldi and Lidl Lose Their Exemption?

The Competition and Markets Authority (CMA) is considering significant changes to the rules governing how supermarkets secure land and property deals, potentially impacting Aldi and Lidl's current exempt status. This move comes as part of a broader review aimed at maintaining a level playing field in the UK retail sector. Let's dive into the implications of these potential changes and how they might affect the competitive landscape of grocery shopping in the UK.

Background: The Groceries Market Investigation (Controlled Land) Order 2010

The Groceries Market Investigation (Controlled Land) Order 2010 was established following a comprehensive investigation into the groceries market. This order restricts seven major supermarkets—Tesco, Sainsbury’s, Asda, Morrisons, Waitrose, M&S, and Co-op—from using land deals that block competitors from opening nearby stores[1][2]. However, Aldi and Lidl were not included in these restrictions due to their smaller presence in the UK at the time[2].

Current Situation: Aldi and Lidl’s Exemption

Aldi and Lidl have continued to grow significantly in the UK, with Aldi now boasting over 1,050 stores and Lidl having more than 960[2]. Despite their expanded presence, they remain exempt from the restrictions, allowing them to utilize property deals with clauses that can prevent rival stores from opening nearby[1][3]. This exemption has been criticized by some, including Iceland Executive Chair Richard Walker, who accused them of using "legal tricks" to block competition on retail parks[2].

CMA’s Review: Why Change Now?

The CMA is now reviewing these rules due to changes in the grocery sector and concerns about unequal treatment among retailers[1][2]. The regulator is assessing whether the rules should be extended to include Aldi and Lidl, or if they should be removed altogether to allow all supermarkets to engage in competitive land deals[2][3]. Here are some key factors driving this review:

• Market Changes: Aldi and Lidl have become major players in the UK grocery market, significantly increasing their store count and market share. This growth has led to calls for them to be treated similarly to larger traditional supermarkets.
• Competition Concerns: Excluding Aldi and Lidl from the rules has raised concerns among traditional supermarkets about unfair competition. They argue that the exemption allows these discounters to use restrictive covenants in property deals that hinder competition.
• Regulatory Environment: The CMA aims to ensure a level playing field. Given the significant changes in the market, it is considering whether the current exemptions are still justified.

Potential Implications

If the CMA decides to bring Aldi and Lidl under the existing rules, it would prevent them from using property deals with clauses that block rival stores from opening nearby. This would increase competition in the market by allowing more retailers to establish themselves in areas currently dominated by the discounters.

Potential Outcomes:

• Inclusion Under Existing Rules: If Aldi and Lidl are included, they would lose the ability to use restrictive land clauses, potentially opening up more opportunities for competitors.
• Removal of Restrictions: Alternatively, if all restrictions are removed, traditional supermarkets could use similar clauses to block new Aldi and Lidl stores from opening nearby.
• Market Competition: Either outcome could lead to increased competition, potentially benefiting consumers through more choice and better prices.

Legal Challenges

Aldi and Lidl might challenge any decision to remove their exemption. Lawyers argue that these retailers could claim they still do not offer a "full range of groceries," which was the basis for their original exclusion from the rules[1]. This could lead to legal disputes over what constitutes a "full range" and how many stock-keeping units (SKUs) are necessary to meet this criterion.

Public and Industry Reaction

Iceland's Richard Walker has been vocal about the need for change, stating that Aldi and Lidl's current practices prevent competition[2]. Other retailers might also welcome a more level playing field, hoping to expand their presence in areas currently dominated by discount stores.

Conclusion

The CMA's review of anti-competitive land rules marks a significant moment for the UK retail sector. The decision will impact not just Aldi and Lidl but potentially reshape the entire competitive landscape of grocery shopping. As consumers, businesses, and regulators await the CMA's decision, it remains clear that maintaining fair competition is crucial for the health and prosperity of the UK's grocery market.

Key Takeaways

• CMA Review: The CMA is considering changes to rules that prevent supermarkets from blocking competitors.
• Aldi and Lidl’s Exemption: The current exemption for Aldi and Lidl allows them to use restrictive covenants in property deals.
• Potential Changes: The CMA might include Aldi and Lidl in these restrictions or remove them altogether.
• Impact on Competition: Changes could lead to increased competition and more options for consumers.
• Potential Legal Challenges: Aldi and Lidl may contest any decisions that affect their current market practices.

By understanding these developments and their implications, businesses and consumers can better navigate the evolving landscape of UK retail competition.