The competition watchdog is to investigate whether "any failure in competition" is leaving consumers paying higher grocery and fuel prices than they should be, it has announced. The Competition and Markets Authority (CMA) said it had not seen evidence pointing to specific competition concerns in the grocery sector "at this stage", but it was "important to be sure that weak competition is not adding to the problems".
The CMA said: "Given ongoing concerns about high prices, we are announcing the stepping up of our work in the grocery sector to understand whether any failure in competition is contributing to grocery prices being higher than they would be in a well-functioning market."
The watchdog said it will assess how competition is working overall in the grocery retail market, and identify which product categories, if any, "might merit closer examination across the supply chain". It will provide an update on its work over the coming months.
CMA chief executive Sarah Cardell said: "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."
Sue Davies, head of food policy at Which?, said: "It is right that the regulator is taking a leading role in holding firms to account during the cost of living crisis by reviewing whether consumers are paying unfair prices for groceries, alongside the project it has already announced looking at how unit pricing is provided by supermarkets. Although food supply chains have been facing several pressures and a whole range of factors affect the final food price, consumers must not be forced to pay a higher price for food unnecessarily."
The CMA also announced an update on the Road Fuel market study it began last year, saying that indications were that higher pump prices could not be attributed solely to factors outside the control of the retailers and "appear in part to reflect some weakening of competition in the road fuel retail market". Evidence indicated that fuel margins had increased in particular for supermarkets over the past four years, with average 2022 supermarket pump prices appearing to be around 5p per litre more expensive than they would have been had their average percentage margins remained at 2019 levels.
The CMA said it was also concerned that it may be seeing evidence of weaker competition in diesel compared with petrol since the beginning of 2023, adding it "needs to understand whether weaker competition is part of the explanation for this".
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The watchdog said: "Whilst the level of engagement with the study has varied across supermarkets, we are not satisfied that they have all been sufficiently forthcoming with the evidence they have provided. In particular, important information has only been received late in the day and after several rounds of information gathering. Given the concerns we have about a market of such importance to millions of drivers it is vital we get to the bottom of what is going on."
The CMA will now conduct formal interviews with the supermarkets' senior management "in order to get to the heart of the issues" and will issue a final report no later than July 7.
Ms Cardell said: "The rising cost of living is putting people and businesses under sustained financial pressure. The CMA is determined to do what it can to ensure competition helps contain these pressures as much as possible.
"Our Road Fuel market study is nearly complete. Although much of the pressure on pump prices is down to global factors including Russia's invasion of Ukraine, we have found evidence that suggests weakening retail competition is contributing to higher prices for drivers at the pumps. We are also concerned about the sustained higher margins on diesel compared to petrol we have seen this year.
"We are not satisfied that all the supermarkets have been sufficiently forthcoming with the evidence they have provided in our Road Fuel market study, so we will be calling them in for formal interviews to get to the bottom of what is going on. It is a priority for the CMA to publish a full and final report, including recommendations for action, by the beginning of July."
AA president Edmund King said: "Today's CMA's decision is hugely welcome in confirming what millions of UK drivers have long believed, that they too often get a raw deal at the pump. Hopefully, it will compensate for the damage done to family and business finances by bloated pump prices since 2021.
"Since the pandemic, competition between forecourts has too often and in too many places been non-existent. The current diesel price scandal and the fiver-a-tank cost difference between neighbouring communities are just two examples. More recently, a handful of maverick small forecourts slashing prices, saying they can still stay commercially viable, has exposed the shame of the other retailers."
