Discount supermarket rivals Aldi and Lidl, recently arrived in Ireland, are under investigation in Germany following allegations of illegal price-cutting.
Last month the Federal Cartel Office, the German competition watchdog, launched an investigation into the activities of the supermarket group Wal-Mart in Germany. No evidence of illegal activity was found, but the inquiry has now been broadened to include Lidl and Aldi.
Lidl and Aldi were anxious to dissociate their businesses here from the investigation and have said the German situation is in no way connected to their Irish concerns. "We operate as a separate trading company," said a spokesperson for Lidl Ireland.
Aldi opened its first two stores in the Republic in November 1999 in Dublin and Cork and opened a further two in Letterkenny and Galway this year. Between four and six more are due to open before the end of the year.
Lidl is to open its first seven Irish branches today in Athlone, Ballinasloe, Cavan, Letterkenny, Limerick, Mullingar and Portlaoise. Three more outlets will be opened by the end of August in Shannon, Killarney and Youghal.
Both German multiples offer discount "no frills" products, with lower operational costs and lower profit margins than conventional supermarkets. Their arrival has provoked concerns about below-cost selling.
A spokesperson for Lidl said the German investigation had shown there was "no proof that below-cost selling is going on"; however the Cartel Office has yet to conclude its inquiries. A spokesperson for Aldi said the company fully complied with the Grocery Order Act. Aldi met the Oireachtas joint committee on enterprise and small business in February. According to its spokesperson, the committee was "entirely happy" with Aldi's operations.
A spokesman for the Office of Consumer Affairs has said foreign companies trading in the Republic would be subject to the same restrictive practices legislation as applied to Irish traders. "It is a matter for people coming in and setting up their businesses here to see that they comply with Irish law." Concerns regarding discount-sellers and possible price wars are high among retail businesses, which are worried that Tanaiste's proposal to the Grocery Order Act will be amended to allow for below-cost selling of certain basic food products. The Department of Enterprise, Trade and Employment has said the proposal is just under consideration and that the Tanaiste has decided to take a few months before settling the matter.
The retail grocers' organisation RGDATA has questioned the wisdom of Lidl's locations for its new outlets. Its 10 new stores will be based in rural towns. RGDATA's director general, Ms Ailish Forde, said small retailers would not be threatened by the arrival of the foreign multiple. "There's already a strong retail base in rural towns, Lidl are catering for a niche market and I'm not sure they'll find it there."
Lidl carries 90 per cent own brands and has a limited range of products, stocking 850 lines in comparison to the 10,000-plus products carried by the average supermarket.
"Lidl will be selling brands that Irish people wouldn't know and their range is limited . . . so I can't really see Lidl surviving in rural towns," said Ms Forde. Lidl said it was not specifically targeting rural areas and that the locations were chosen due to planning permission considerations.
