UK competition watchdog ramps up grocery sector monitoring amid cost-of-living crisis

01 Jun 2023 --- The UK’s Competition and Markets Authority (CMA) is stepping up its work in the groceries sector to ensure that retail markets work well and don’t harm consumers amid soaring inflation.

The notice comes after the UK experienced this April the second worst month for food inflation in since 1977.

In an open letter published yesterday, the CMA explains that it is currently undertaking work to assess how competition works overall in the grocery retail market, drawing on publicly available data and other information. 

The authorities will also look at competition between suppliers and between raw material providers.

The CMA states it has seen no evidence “at this stage” of specific competition problems but, “given ongoing concerns about high prices,” it aims to ensure fair market competition and that consumers “exercise choice with confidence.”

The open letter is part of the CMA’s update on its action to help contain cost-of-living pressures in road fuel and groceries.

Targeting retailer profitability
The CMA says it is looking at trends in retailer profitability, focusing on the major supermarkets and the discounters who account for over 80% of overall grocery spending.

The open letter is part of the CMA’s update on its action to help contain cost-of-living pressures in road fuel and groceries.The authorities will also examine product-level inflation indices and how these relate to trends in input costs.

In parallel, the CMA says it will identify which product categories, if any, might “merit closer examination across the supply chain.” 

It will explore data on retail prices and trends in input costs, as well as characteristics of candidate products, such as whether there are many or few suppliers or if these products have raised competition concerns in other countries.

CMA seeks stakeholder views 
The CMA plans to speak to a wide range of stakeholders between now and the end of June, including suppliers and retailers, consumer associations, industry bodies, national and devolved government, industry experts and other stakeholder groups. 

Competition authorities are particularly interested in hearing from stakeholders with information regarding expectations of future prices. Furthermore, they want to gather information about profitability at different points in the supply chain, about the relationship between changes in input prices and changes in consumer prices and receive evidence and views on any constraints or bottlenecks that might “dampen competition” between suppliers.

The CMA also highlights it will publish an update on its work in late July, along with a report on its unit pricing work, which aims to make it easier for consumers to compare prices of different products and sizes. 

The report will include recommendations to the government on improving unit pricing practices.

Edited By Marc Cervera