Supermarkets must make prices clearer, the UK’s competition watchdog has said after finding that confusing labels were preventing shoppers from getting the best deals.
Food retailers and their suppliers will be subject to a detailed investigation into competition in 10 product categories including milk, bread, and baby formula as part of efforts to ensure households benefit from competitive prices as cost inflation falls.
The Competition and Markets Authority (CMA) has written to retailers asking them to address its concerns about unclear price labels and said it would consider enforcement action if they did not change their behaviour.
The watchdog said it did not find that weak competition had driven the historically high food price inflation that has emerged in the past 18 months. Average operating profits in the retail grocery sector fell by more than 40% in 2022-23 compared with the previous year, while average operating margins declined from 3.2% to 1.8%, the CMA said. The findings pour cold water on fears that “greedflation” from supermarkets was pumping up prices.
Its report said not everyone was benefiting from strong competition, particularly those who could not travel to large stores or shop online and may rely on higher-priced convenience stores instead.
It said unclear labelling was making it harder for shoppers to find the best deals.
Sarah Cardell, the CMA chief executive, said: “With so many people struggling to feed their families, it’s vital that we do everything we can to make sure people find the best prices easily. We’ve found that not all retailers are displaying prices as clearly as they should, which could be hampering people’s ability to compare product prices.
“We’re writing to these retailers and warning them to make the necessary changes or risk facing enforcement action. The law itself needs to be tightened here, so we are also calling on the government to bring in reforms.”
She added: “We’ve also looked at how competition is working across the grocery retail market more widely. The overall evidence suggests a better picture than in the fuel market, with stronger price competition between all of the supermarkets and discounters.
“In the next phase of our work, we will examine competition and prices across the supply chain for the product categories we’ve identified. We’ll also continue to monitor the situation to ensure that competition remains effective as input costs start to fall.”
The watchdog said it was recommending changes to the law to ensure retailers make price labels more clear after identifying a number of confusing practices. It said it had found inconsistent pricing – with different measurements used for similar types of products, such as teabags being priced per 100g for some products and others priced per teabag within the same store – making it hard to compare.
The CMA said unit prices were in some cases illegible, obscuredor missing – such as for online shoppers or on specific promotions.
It recommends that unit pricing regulations are altered to ensure that all products on promotion, including multi-buys and special prices for loyalty scheme members, should show a unit price comparable with the standard price.
Other recommendations include ensuring only one unit measurement can be used per product type across all retailers and across all sales channels, to enable shoppers to make meaningful comparisons; and ensuring prices are legible, not obscured and close to the products they relate to. Retailers have been asked to ensure that own-label products use the same method of unit pricing, for example per 100ml or 100g, as similar branded items.
In June, the consumer group Which? reported Tesco to the watchdog over its failure to provide detailed pricing information on its loyalty Clubcard offers.
A spokesperson for Britain’s biggest supermarket chain said it had already confirmed plans to introduce unit pricing on “simple promotions” by early next year. Tesco said: “We are supportive of the CMA’s recommendation to clarify the guidance on unit pricing to provide customers with more transparency.”
Helen Dickinson, the chief executive of the British Retail Consortium, said fierce competition between British supermarkets was a key reason why the UK continued to “deliver among the cheapest groceries in Europe”.
She said: “As noted in the report, supermarket margins have remained extremely tight as they try to support their customers and absorb the worst of the rising costs in the supply chain. In the last few months, some of these pressures have begun to ease, such as with global commodity prices and the weakness of the pound, and we are now seeing competition driving down the price of key staples,.”
On Wednesday, Asda received a dressing down from MPs after its co-owner Mohsin Issa declined to answer multiple questions on whether profit margins on fuel had been increased since the supermarket chain was bought by a consortium including him and his brother Zuber in 2021.
The CMA told MPs that Asda’s profit margins on fuel had tripled since before the pandemic, contributing to inflation at the pump as other retailers followed its lead.
Asda was summoned by MPs to answer questions after a report on the UK’s fuel market found drivers had paid about £900m more at the pump since 2022 after retailers widened their profit margins by 6 pence a litre.
On Thursday, Asda announced an average 9% price cut on just over 200 everyday grocery items.
