Cost of living: Supermarkets including Asda investigated over food and fuel prices by competition watchdog CMA
The competition watchdog will look at whether a “failure in competition” has led to customers overpaying for food and fuel
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Supermarkets in the UK are being investigated over food and fuel prices by the competition watchdog. The Competition and Markets Authority (CMA) said it would look at whether a “failure in competition” meant customers were overpaying for food and fuel.
Supermarkets claimed they were working to keep food prices as low as possible. However, an investigation into the fuel market, which has started, found some supermarkets have increased margins in petrol and diesel amid a cost of living crisis.
The CMA has revealed that evidence suggested a higher target for the margin on fuel prices in 2022 had been set by at least one supermarket. This could have led to rivals following suit and raising prices too.
Asda is among the UK supermarkets being investigated over the food and fuel prices. A spokesperson for the supermarket giant said that the chain would work “in full-cooperation” with the CMA, adding they were “focussed on providing our customers with the best value at the pumps”.
“UK has one of the most competitive markets for food in the world”
Director of food and sustainability at the BRC Andrew Opie said supermarkets were “confident” in “doing all they can to keep food prices as low as possible”. He said: "The UK has one of the most competitive markets for food in the world, and as global prices begin to fall we are confident that the competitive nature of the industry will help food inflation fall as a result.”
The news comes as households in the UK have been hit with higher food prices in recent months. Some have questioned why a drop in the cost of wholesale food globally hasn’t led to a fall in UK supermarket food prices.
Supermarkets have claimed there is a three to nine-month wait to see price falls in shops. The war in Ukraine has also driven up food prices around the world.
Additionally, the UK has faced other factors that have impacted an increase in supermarket food prices. These include Brexit red tape to labour shortages.
Global factors impact pricing
Sarah Cardell, chief executive of the CMA, said while the watchdog recognised the “global factors” behind price hikes, it has seen “no evidence at this stage of specific competition problems”. She added: “[The CMA is] stepping up our work in the grocery sector to help ensure competition is working well and people can exercise choice with confidence.”
She added that the watchdog was “concerned about the sustained higher margins on diesel compared to petrol we have seen this year". Her team was not satisfied that all the supermarkets had been “sufficiently forthcoming with the evidence” on fuel pricing.
Supermarket bosses will be called in for formal interviews to “get to the bottom of what is going on”, she said. The CMA said at least one supermarket had significantly increased its margin targets last year: "Other supermarkets have recognised this change in approach and may have adjusted their pricing behaviour accordingly.”
Higher pump costs not just due to global factors as investigation starts
While the CMA has noted Russia’s invasion of Ukraine as a factor which caused prices to rise, they added that higher fuel prices could not be “attributed solely to factors outside the control of the retailers”. Instead, it said higher prices at pumps were partly due to “some weakening of competition” in the UK fuel retail market.
The fuel market has been reviewed for several months over concerns retailers and forecourts were failing to pass on a 5p fuel duty cut to motorists. The motoring groups claimed the CMA confirmed the group’s fears that drivers were not getting a fair deal.
The CMA found evidence in December 2022 that “rocket and feather” fuel pricing happened last year. This is when fuel prices rise as wholesale costs rise, but then fall more slowly than costs come down.
Edmund King, president of the AA, said: "If ever a business sector needed a major shake-up, it's the fuel trade - critical to the cost of living, family finances, transport costs and inflation.”
Simon Williams, fuel spokesman for the RAC, added: "Something badly needs to change to give drivers who depend on their vehicles every day a fair deal at the pumps. We hope even better news will be forthcoming later this summer."