The CMA has published an update on its action regarding cost of living concerns. Its update relates to two areas - road fuel and groceries.
In relation to fuel, it says that although the majority of fuel price increases are due to global factors, such as the war in Ukraine, higher pump prices cannot be attributed solely to factors outside the control of the retailers. Fuel margins have increased across the retail market, but in particular for supermarkets, over the past four years. Based on evidence gathered as part of its Road Fuel market study, the higher prices drivers are paying at the pumps appear in part to reflect some weakening of competition in the road fuel retail market. The CMA is also concerned that it may be seeing evidence of weaker competition in diesel, compared with petrol, since the beginning of 2023. It now plans to conduct formal interviews with the supermarkets’ senior management and will publish its final report by 7 July 2023, which will set out any further action it believes necessary.
Regarding groceries, the CMA says that although global factors have also been the main driver of grocery price increases, it wants to be sure that weak competition is not adding to the problems. Given ongoing concerns about high prices, it is carrying out more 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. The prices that consumers pay for their groceries are the result of competition at three main levels of the market:
- Competition between retailers, where consumers shop for their products.
- Competition between suppliers who make the products and sell them to the retailers.
- Competition between raw material providers who provide the inputs to food suppliers.
The CMA intends to focus on the areas where people are experiencing greatest cost of living pressures. It will therefore carry out work to assess how competition is working overall in the grocery retail market, drawing on publicly available data and other information. In addition, it will identify which product categories, if any, might merit closer examination across the supply chain.
In addition, the UK government is consulting on strategic steer setting out its expectations for how the CMA should approach its work. It says that the CMA should consider this steer when it sets its strategy and when it makes decisions on where to focus and prioritise its finite resources. The government’s overarching expectation is that the CMA should focus on achieving outcomes that help individual consumers and businesses to meet cost of living challenges, while also boosting sustainable growth and productivity, and maintaining and enhancing the UK as a global destination for investment. The consultation ends on 23 June 2023.