Asda's Price Guarantee could push prices up rather than down, claims a leading competition expert.
Professor Morten Hviid, from the University of East Anglia's Centre for Competition Policy, claims the price guarantee and the use of a redeemable voucher will discourage shoppers from looking elsewhere. This, he argues, would allow Asda to "safely edge its prices upwards".
"I am not claiming this is a deliberately anticompetitive strategy by Asda, but these are the economic effects," said Hviid. "Before hailing this 'price promise' as a bonus for consumers, it is important to remember that identical prices across sellers are not the same as low prices."
When former Asda CEO Andy Bond announced the new initiative he said it would put an end to "the phoney price war of promotions" by letting shoppers compare the price of a basket of goods at Asda with Tesco, Sainsbury's and Morrisons. Should the basket be cheaper elsewhere, Asda would refund the difference, plus a penny, in the form of a voucher.
"The incentive for the other supermarkets to respond to Asda by cutting their price is hence much reduced as this would neither entice new customers from Asda nor entice defectors back," claimed Hviid.
An Asda spokesman described the professor's theory as "poppycock". "There is no retailer that is more focused on lowering prices than Asda," he said.
A source close to the Competition Commission, which completed its two-year inquiry into the grocery market last March, told The Grocer that it was highly unlikely these claims would be formally investigated.
The price guarantee is a key part of Asda's strategy to arrest its recent underperformance. Since the end of last year it has lost market share to rivals, most notably Morrisons, and this week announced a 0.3% fall in like-for-like sales for the three months to 31 March.
The figures support the assertion made by Morrisons CFO Richard Pennycook two weeks ago that, although its first-quarter sales growth had slowed dramatically to 0.8%, it was still ahead of the market "by a nose".
Professor Morten Hviid, from the University of East Anglia's Centre for Competition Policy, claims the price guarantee and the use of a redeemable voucher will discourage shoppers from looking elsewhere. This, he argues, would allow Asda to "safely edge its prices upwards".
"I am not claiming this is a deliberately anticompetitive strategy by Asda, but these are the economic effects," said Hviid. "Before hailing this 'price promise' as a bonus for consumers, it is important to remember that identical prices across sellers are not the same as low prices."
When former Asda CEO Andy Bond announced the new initiative he said it would put an end to "the phoney price war of promotions" by letting shoppers compare the price of a basket of goods at Asda with Tesco, Sainsbury's and Morrisons. Should the basket be cheaper elsewhere, Asda would refund the difference, plus a penny, in the form of a voucher.
"The incentive for the other supermarkets to respond to Asda by cutting their price is hence much reduced as this would neither entice new customers from Asda nor entice defectors back," claimed Hviid.
An Asda spokesman described the professor's theory as "poppycock". "There is no retailer that is more focused on lowering prices than Asda," he said.
A source close to the Competition Commission, which completed its two-year inquiry into the grocery market last March, told The Grocer that it was highly unlikely these claims would be formally investigated.
The price guarantee is a key part of Asda's strategy to arrest its recent underperformance. Since the end of last year it has lost market share to rivals, most notably Morrisons, and this week announced a 0.3% fall in like-for-like sales for the three months to 31 March.
The figures support the assertion made by Morrisons CFO Richard Pennycook two weeks ago that, although its first-quarter sales growth had slowed dramatically to 0.8%, it was still ahead of the market "by a nose".
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