Competition watchdog launches probe into supermarkets over record food and fuel prices

Supermarkets are facing a new investigation into record-high prices for food and drink, after Britain’s regulator accused them of stalling its existing probe into the cost of fuel.

Groceries have risen at their fastest rate in over 45 years, increasing year-on-year to 19.2 per cent in March – up from 18.2 per cent in February.

The Competition and Markets Authority (CMA) said it had no evidence of specific concerns “at this stage” but that it was “important to be sure that weak competition is not adding to the problems.”

“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,” it said.

The move comes as Downing Street hosts a “food summit” on Tuesday despite abandoning plans for a horticulture strategy to reduce reliance on imports and episodes of empty shelves.

Last week, the Bank of England said food prices have stayed higher for longer than expected, partly due to Russia’s war in Ukraine and poor harvests in some European countries, ramping up the cost of living for households.

Liberal Democrat leader Ed Davey welcomed the probe and said the Tory ministers had failed to act to “bring down food prices”. He added: “Large supermarket profits in the face of spiralling food prices will not sit right with the country. This is an important first step in holding their bosses to account.”

Supermarket bosses have reportedly assured John Glen, chief secretary to the Treasury, and other officials that food inflation was “past the peak” and that prices would come down soon.

However, the CMA said it will now 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”.

Sarah Cardell, CMA chief executive, said: “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.”

The watchdog also issued an update on its investigation into petrol and diesel prices, saying there are indications higher pump prices could not be attributed solely to global concerns 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: “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 supermarket bosses “in order to get to the heart of the issues” and will issue a final report by 7 July.

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. Although food supply chains have been facing several pressures … consumers must not be forced to pay a higher price for food unnecessarily."

AA president Edmund King said: “This 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.”