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Britain's biggest supermarkets have united in a bid to close a loophole they claim gives Aldi and Lidl an unfair advantage in the race to open new stores. Sainsbury's, Morrisons and Iceland have called on the Competition and Markets Authority (CMA) to widen property rules that currently apply to large grocery retailers.

Sainsbury's has warned there is a "serious risk" competition is "less effective than it could be", arguing the discounters have an "asymmetric ability" to restrict rival expansion in local markets. In a written submission, they wrote: "Competition is currently being distorted by the asymmetric ability of Aldi and Lidl to restrict entry and expansion by competitor grocery retailers in local markets, while equivalent restrictions apply to other retailers of comparable or smaller scale." Currently, Lidl and Aldi are designated as "limited assortment discounters", which has historically kept them outside the rules applying to Tesco, Sainsbury's, Morrisons, Asda and Waitrose.

However the CMA is now considering whether Aldi and Lidl should be designated as Large Grocery Retailers under the 2010 Groceries Market Investigation Controlled Land Order.

Morrisons said widening the rules was needed to "ensure a level playing field", arguing that Aldi and Lidl's combined market share had risen from less than 3% when the rules were first drawn up to around 20% today.

It also argued the German discounters could no longer be clearly described as uniquely "low price" retailers, given price-matching schemes introduced by larger rivals such as Tesco and Sainsbury's.

Aldi has pushed back, insisting its classification should remain unchanged because its "consistently" lower prices are "only achievable" through a limited product range and simpler operating model. It said its prices are typically 15% to 21% lower than the "big four" supermarkets, while it offers fewer services.

In its submission to the competition regulator, Aldi said: "We do not operate ecommerce, click and collect or home delivery services, butchery or fishmonger counters, delicatessens, pharmacies, opticians, cafés or 24-hour stores."

It added: "We do not sell tobacco products or newspapers. Our stores are significantly smaller, with a standard net sales area of approximately 1,230 square metres."

A ruling against the retailers would come as a severe blow as both continue to expand their presence across the UK.

Last month, Lidl said it expects to open more than 50 new stores in the next 12 months as part of a £600 million investment plan.

The UK's sixth-largest supermarket chain said the move is set to create close to 2,000 jobs across the UK.

Similarly, Aldi announced in January that it plans to open 40 new stores across the UK this year as part of a £370 million investment pledge.

The German-owned discount retailer, which is Britain's fourth biggest grocery chain, said it wanted to fill the "gaps" in areas where there are no stores.