Sainsbury’s, Asda and land banking ‘harmed customers’

Sainsbury’s, Asda and the Competition Watchdog have both been accused of breaking land-use laws in order to prevent rivals from opening up shops near their stores.

The Competition and Markets Authority (CMA) has ordered supermarkets to terminate contracts which prevent competitors from opening stores near their own.

The CMA stated that Sainsbury’s as well Asda both violated competition laws on numerous occasions, and had imposed restrictions which “cause real harm” to customers.

Sainsbury’s was found to have violated the law 18 times between 2011-2019, according to regulators. Asda also violated the order 14 times during the same time period. Both parties have pledged now to remove conditions from their lease agreements in order to ensure compliance.

The legislation prohibits supermarkets from signing agreements to prevent rivals from opening a store in their own land, or contracts with landlords that would block competitors from opening a shop near them for a period of at least five years. Tesco, Sainsbury’s Morrisons Asda Waitrose Marks & Spencer and Co-op were all affected by the legislation.

David Stewart, executive Director of Markets and Mergers at the CMA said: “Restrictions such as these are illegal, cause real harm for shoppers and will be not tolerated.” Competition between supermarkets is crucial to help consumers get the best deals.

In 2020, the CMA took its first action when it identified issues with Tesco’s contracts. The CMA found that Tesco had violated Groceries Market Investigation Order 2010 (Controlled Land Order) 23 times. The regulator opened a wider investigation into the land agreements between Tesco and its competitors. Waitrose committed seven violations. Sainsbury’s resolved half of the breaches found by the investigation. A spokesperson said that the supermarket is “taking steps to ensure this doesn’t happen again” and that the minor technical breaches did not affect the ability of the supermarket or its competitors to compete or operate.

A Asda spokesperson said that the company “worked in collaboration with the CMA”, and examined the details of over 1,600 property transactions, to identify violations.

He said: “All of these transactions relate to Asda legacy transactions that took place between 2011 and 2019 when Asda had a different owner, and all involve technical errors with documentation which have been corrected.”

The CMA has no power to fine supermarkets. The Digital Markets, Competition and Consumers Bill, currently being debated in parliament, will give the watchdog the power to levy financial sanctions.

In recent months, the authority has scrutinized supermarkets from multiple angles. The regulator is investigating allegations of profiteering during the current cost of living crisis.

The CMA stated: “At the present time, we have seen no evidence that points to new competition concerns specific to the grocery sector.”

The CMA is also questioning supermarkets about petrol and diesel price increases after finding evidence that recent increases “cannot solely be attributed to factors beyond the control of retailers”. The CMA found that one supermarket significantly increased their margin targets, but this did not result in a competitive response from rivals.

Simon Williams of the RAC said that the CMA’s actions had confirmed their belief that the “biggest retailers” are taking a higher margin per litre for fuel.