Competition experts have predicted the Competition & Markets Authority may launch an investigation into supermarket “profiteering”, amid claims major food retailers are cashing in on the cost of living crisis.
Tom Smith, a former CMA director and now competition lawyer at Geradin Partners, told The Grocer a probe could mirror the investigation into the fuel price crisis it launched last year.
Its initial findings, published in December, suggested major fuel companies had used “rocket and feather” tactics, which saw drivers face record pump prices as the war in Ukraine saw oil costs shoot up, but much more gradual decreases as oil prices came down.
“Profiteering isn’t straightforwardly against competition law unless a company is deemed to be the dominant player, which isn’t the case in the supermarket sector,” said Smith.
“The CMA could investigate collusion among the supermarkets if it had reasonable grounds to suspect it. Perhaps more likely would be an urgent investigation like the CMA did for fuel pricing last year, which could increase public pressure on the supermarkets and ultimately the imposition of market remedies.”
Smith said he believed a probe was “quite likely” given the CMA’s recent track record of intervention.
Exploitation
Speaking on the BBC Today programme, Davey said the case was not as clear-cut as the exploitation of the energy crisis by energy companies, but said there was growing evidence supermarkets were cashing in on rampant inflation.
“We need to bring soaring food prices back under control and offer relief to families. That means cracking down on profiteering by food multinationals and the big supermarkets so customers get a fair deal,” said Davey. ”We’ve seen profits of Tesco and Sainsbury’s go up hugely.
“Food prices in the UK are going up by more than almost any other country. There is a case there to be answered and we are saying that should be investigated by the CMA.”
Asked if he believed supermarkets had been colluding on prices, Davey added: “There doesn’t have to be collusion for there to be anti-competitive behaviour.”
He said prices had been kept “artificially high”, adding: “We’re not seeing profits go to farmers and smaller retailers.”
However, supermarket leaders strongly denied the claims of profiteering.
Profits fall
BRC director of food & sustainability Andrew Opie said: “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.
“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 BRC-Nielsen Shop Price Index for April found food inflation accelerated to 15.7%, up from 15% in March – the highest inflation rate in the food category on record.
Fresh food was up 17.8%, up from 17% in March, and ambient food was up 12.9% from 12.4% in the previous month – both the highest rates on record.
The spike in food prices was countered by non-food inflation decreasing to 5.5% in April, down from 5.9% in March.
Therefore, overall shop price annual inflation decelerated to 8.8% in April, down slightly from 8.9% in March.
BRC CEO Helen Dickinson suggested a fall in food prices was on the horizon.
“We should start to see food prices come down in the coming months as the cut to wholesale prices and other cost pressures filter through. In the meantime, retailers remain committed to helping their customers and keeping prices as low as possible,” she said.
“Government must also help by minimising the impact of oncoming regulatory burdens, as these will hold back investment and ultimately contribute to ongoing high prices for already-squeezed households.”
No comments yet