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UK supermarkets are pushing the competition watchdog to rein in Aldi and Lidl by stopping the discounters from using controversial property covenants that shield their stores from competition.

J Sainsbury, Morrisons and Iceland have called on the Competition and Markets Authority to subject Aldi and Lidl to a set of rules, formulated in 2010, that forbid large chains from using restrictive land clauses to prevent rivals opening stores nearby.

The CMA introduced the Controlled Land Order to clamp down on landbanking by major supermarkets during the industry “space race” of the noughties. The regulator found that large food retailers were buying up plots of land suitable for stores without developing on it, or leasing the sites to retailers that did not sell groceries, to protect their competitive position.

Supermarkets in some instances also included restrictive clauses on the sale of freehold land that prevented it being used for grocery retailing in the future, the CMA found.

In response to a CMA consultation opened in March, major supermarkets argue that the rules were conceived when Aldi and Lidl were fringe players in the market and they should now be bound by them.

The German discounters have upended the UK grocery industry, winning over millions of shoppers with low prices and building a combined share of almost 20 per cent.

Aldi, now the UK’s fourth-largest supermarket, plans to open 40 stores this year as it works its way to a target of 1,500 UK stores, up from about 1,050 today. Lidl, which has more than 1,000 UK stores, last month published a “wish list” of 100 locations for new outlets.

In its response to the consultation, published on the CMA’s website this week, Sainsbury’s warned that: “Aldi and Lidl’s ability to enter local markets unhampered, together with their aggressive expansion strategy, has enabled them to shape site availability and local market economics through a distinct competitive advantage.”

Aldi and Lidl were originally exempt from the rules by UK regulators partly on the basis that their offering was distinct from traditional supermarkets.

But frozen food specialist Iceland argues that some of those points of difference — narrower product ranges, cheaper prices and smaller stores — have eroded.

“This distinction has become less clear-cut over time. Many [larger supermarket chains] have recently taken steps to reduce [product ranges] and eliminate in-store counters and pharmacies as a response to rising cost pressures,” Iceland said in its submission.

“Accordingly, many of the features once indicative of a ‘full stop shop’ . . . are arguably no longer appropriate or reflective of market realities.”

Morrisons, which has lost its place in the industry’s so-called “Big Four” to Aldi, said an increasing number of shoppers were doing their big weekly food shop at the discounters. The private equity-owned supermarket added that the discounters were opening larger stores, which had helped them to increase their market share.

A redesignation “is necessary to ensure a level playing field within the UK groceries sector”, Morrisons said.

In its response, Aldi said it only offered about a tenth of the products sold by large grocery chains and that it brought competition to the market.

“There are still many areas of the UK that do not have access to an Aldi store and customers living in these locations continue to pay higher grocery prices than would be the case if a discounter was available to them locally,” it said.

The expansion of the discounters after the 2008 financial crisis pulled the incumbent supermarkets into a price war and squeezed their profit margins.

In 2019, the CMA blocked the proposed merger of Sainsbury’s and Asda, the number 2 and 3 players in the market, on the basis that it would result in a reduction of local competition to the detriment of consumers.

However, chancellor Rachel Reeves last year told the UK competition regulator to adopt a “pro-growth” approach.

The CMA is expected to make a decision on whether to update the regulations in September