UK supermarket sector to face major grocery pricing probe by CMA
An investigation has been launched into the supermarket sector by the UK competition regulator after a "super-complaint" from consumer organisation Which? due to the industry's "misleading and opaque pricing practices".
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The Competition and Markets Authority will begin a probe of the grocery sector's pricing promotions that could result in it recommending new laws, enforcing new competition rules or beginning a longer full-scale market investigation.
Which? made its super-complaint to the CMA due to what it felt were "confusing and misleading special offers, a lack of easily comparable prices due to the way unit pricing is being done and shrinking pack sizes without any corresponding price reduction".
The consumer association said that it had identified a range of misleading and confusing pricing tactics in recent year and that consumers could be collectively losing out on hundreds of millions of pounds.
"Over the last seven years Which? has consistently identified a range of misleading and confusing pricing tactics in supermarkets – like dodgy multi-buys, shrinking products and baffling sales offers – that exaggerate discounts. Many retailers are creating the illusion of savings that don’t exist and are manipulating consumer spending by misleading people into choosing products they may not have chosen if they knew the full facts."
The CMA said it will consider the issues raised in the super-complaint in order to establish whether any element, or combination of elements, appears to be significantly harming the interests of consumers.
A super-complaint is defined under UK law as being any submitted by certain consumer bodies over issues that appear to be "significantly harming the interests of consumers".
Within 90 days after the day on which a super-complaint is received, the CMA must say publicly how it proposes to deal with it.
The regulator said possible outcomes include, but are not limited to: "recommending the quality and accessibility of information for consumers is improved, encouraging businesses in the market to self-regulate, making recommendations to government to change the legislation or public policy, taking competition or consumer enforcement action, instigating a market investigation or market study," or, the industry will hope, "a clean bill of health".
Two years ago a probe by the Office of Fair Trading (OFT) cited problems with food pricing display and promotional practices by major supermarkets.
The OFT investigation found that some prices were artificially inflated in an effort to make subsequent discounts look like a better deal.
Has the price-promotion horse bolted?
Analyst Clive Black at Shore Capital dismissed the news as being akin to a plot from Armando Iannucci's political satire, The Thick Of It, due to the lateness of the Which complain. "Horse bolted, stable door closed does not come anywhere near," he moaned, with market forces having impelled the industry to simplify promotions in recent months.
Black noted that promotions have been increasing materially in recent years as a response by manufacturers and retailers alike to rising input costs, with supermarkets and their supply chain finding "the promotional tail started to wag the dog and promotional participation rocketed from 20-25% to circa 40%"
But he pointed to the recent reaction from major supermarket groups Tesco, Sainsbury, Morrison and Asda to the shift in consumer behaviour towards discounters like Aldi and Lidl, which has seen a "massive programmes of simplification", including lower prices, fewer price movements, more straightforward promotions and, from a still high base, fewer offers.
Tesco is expected to provide an update on its own simplification on Wednesday, along with record losses - though on Tuesday Citi upped its target for the stock to reflect the sector's re-rating.
Goldman Sachs recently set out a more dim view of the sector due to the persistent structural headwinds of low inflation and falling calorie intake of British citizens.