Asda and Sainsbury’s scolded for “unlawful” land agreements

Latest reports have revealed that Asda and Sainsbury’s have been warned by the Competition and Markets Authority (CMA) to stop using “unlawful anti-competitive land agreements” so as to not block rival stores.

The CMA has highlighted that these agreements include placing restrictions on land they own from being used by a rival supermarket. They also include imposing restrictions lasting five years or more that inhibit landlords from allowing competing stores on land in the same block as an existing supermarket.

According to the CMA, the two supermarket giants “breached the Groceries Market Investigation (Controlled Land) Order 2010”. This Order was initiated to stop supermarkets imposing new restrictions that stop rivals from opening competing stores nearby.

The CMA has said that the Order allows supermarkets to “compete freely” and ensures that shoppers “have more choice and so benefit from a wider range of groceries and access to cheaper prices”, something it says is “even more important as the cost of living crisis rises”.

In its report, the CMA found that, between 2011 and 2019, Sainsbury’s breached the Order 18 times. Meanwhile during the same time period, Asda breached the Order 14 times.

Commenting on the findings of the report, David Stewart, Executive Director, Markets and Mergers at the CMA said: “Restrictions of this nature are against the law, cause real harm to shoppers and will not be tolerated. This is particularly important at a time when many families are struggling to pay their weekly grocery bills.

“With families under increasing pressure, it is even more critical that competition between supermarkets is helping people to get the best deal.”

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In response to the report, a spokesperson from Asda told New Food: “We have worked collaboratively with the CMA as part of their ongoing market review of historic CLO compliance across the grocery retail sector.

“We have reviewed details of over 1,600 property related transactions which identified 14 issues. All of these relate to legacy transactions that occurred between 2011 and 2019, when Asda was under different ownership, and involve technical errors in documentation that have all been resolved. We have also taken action to strengthen our CLO-related training and guidance.”

Meanwhile, Sainsbury’s also provided a statement, with a spokesperson commenting: “We acknowledge the CMA’s comments about the recent review of our land agreements, which identified a small number of instances that we consider to be technical breaches of the Controlled Land Order (CLO).

“They amount to less than one percent of our relevant land agreements to which the CLO applies, which have been made over the course of more than a decade.”

The Sainsbury’s spokesperson went on to label the allegations as “minor, unintentional technical breaches”, and claim that they “did not impact our ability or that of our competitors to operate or compete in any way”.

“We have cooperated fully with the CMA throughout this process and we are now resolving these issues, as well as taking steps to make sure this does not happen again,” the Sainsbury’s spokesperson continued.

Concluding its statement, the Sainsbury’s spokesperson claimed that “nine of the eighteen breaches identified in the review of Sainsbury’s leases have already been rectified”.

The CMA has confirmed that Sainsbury’s has agreed to remove the outstanding restrictions that the CMA identified from its land agreements to become compliant with the Order. It also said that the restrictions identified within Asda’s land agreements have now been removed.

In addition, the CMA has written to both Asda and Sainsbury’s to outline the breaches and the action agreed to prevent further breaches.

“This enforcement action today is part of our wider action to tackle the cost of living and ensure that families really benefit from more competition,” explained Stewart.

Stewart went on to say that the CMA has recently “stepped up” its work to assess whether any failure in competition is contributing to grocery prices being higher. This work is part of a programme of activity by the CMA that enforces the Order’s rules on land agreements. It includes action on similar breeches of the same rules, including by Tesco in 2020 (where there were 23 breaches), and Waitrose in 2022 (7 breaches).

Stewart confirmed that the CMA will be disclosing their findings on this in July 2023. New Food will keep its readers updated with these findings in due course.