The Competition & Markets Authority has launched a probe into supermarkets following accusations of profiteering on the back of the cost of living crisis.
The CMA will focus on whether there are adequate safeguards to ensure competition among supermarkets and their suppliers amid concerns over soaring food price inflation.
The move comes less than 24 hours before prime minister Rishi Sunak is due to host an emergency summit with supermarket CEOs and farming leaders, in a food summit likely to be dominated by concerns over inflation.
The Grocer revealed earlier this month that leading competition experts believed there was a strong chance the CMA would look at the issue of supermarket pricing on the back of a storm of controversy over food prices.
The CMA confirmed its plans after releasing more findings from its ongoing probe into fuel prices, including evidence that supermarkets had been exploiting market conditions to increase margins on fuel over the past four years.
Global factors
In a statement today, the authority admitted that “global factors” such as the war in Ukraine had been the main driver of high grocery price increases, adding “at this stage the CMA has not seen evidence pointing to specific competition concerns in the grocery sector”.
But it said: “It is important to be sure that weak competition is not adding to the problems.”
The probe will focus on work to assess how competition is working overall in the grocery retail market, drawing on publicly available data and other information. In parallel, the CMA will look at identifying which product categories, if any, might merit closer examination across the supply chain.
It planned to engage with a “wide range” of industry participants, experts, and other stakeholder groups to inform the probe with a report in the coming months.
“The rising cost of living is putting people and businesses under sustained financial pressure,” said CMA CEO Sarah Cardell.
“The CMA is determined to do what it can to ensure competition helps contain these pressures as much as possible. Grocery and food shopping are essential purchases. We recognise that global factors are behind many of the grocery price increases, and we have seen no evidence at this stage of specific competition problems.
”But, given ongoing concerns about high prices, we are stepping up our work in the grocery sector to help ensure competition is working well and people can exercise choice with confidence.”
Andrew Opie, director of food & sustainability at the BRC, strongly denied there was any evidence of profiteering.
Profits fall
“Many supermarkets have seen profits fall in the last year due to the high cost of energy, transport, and labour, as well as higher prices paid to food manufacturers and farmers,” he said.
”Despite the squeeze on margins, retailers are investing heavily in lower prices for the future. To further help those impacted by the high cost of living, supermarkets have expanded their affordable food ranges, locked the price of many essentials, and continue to offer support to vulnerable groups. When cost pressures facing retailers do eventually ease, retail prices will follow fast as they fiercely compete for market share.”
The CMA also launched an update into its investigation into pump prices, launched last year.
It said while again evidence showed that the majority of fuel price increases were due to global factors, such as the Russian invasion of Ukraine, indications were that not all factors were outside the control of the retailers.
Average 2022 supermarket pump prices were around 5p per litre more expensive than they would have been had their average percentage margins remained at 2019 levels, it said.
“Although supermarkets still tend to be the cheapest retail suppliers of fuel, evidence from internal documents indicates that at least one supermarket has significantly increased its internal forward-looking margin targets over this period. Other supermarkets have recognised this change in approach and may have adjusted their pricing behaviour accordingly. ”
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