Make your price tags clearer, watchdog tells UK supermarkets

Supermarkets need to make prices clearer, the UK’s competition watchdog said after finding confusing labels were preventing shoppers from getting the best deals.

Food retailers and their suppliers will be subject to detailed competition research across 10 product categories, including milk, bread and baby formula, as part of efforts to ensure households benefit from competitive pricing as they reduce cost inflation.

The Competition and Markets Authority (CMA) has written to retailers asking them to address their concerns about unclear price tags and said it would consider action if they did not change their behaviour.

The watchdog said it did not find that weak competition has fueled the record-high food price inflation that has surged in the past 18 months. Average operating profits in the grocery retail sector fell more than 40% in 2022-23 compared to the previous year, while average operating margins fell to 1.8% from 3.2%, the CMA said. The findings pour cold water on fears that supermarket “greed” was driving up prices.

Their report says that not everyone benefits from stiff competition, particularly those who can’t travel to big box stores or shop online and can rely on higher-priced convenience stores.

He said unclear labeling was making it harder for shoppers to find the best deals.

Sarah Cardell, Chief Executive of CMA, said: “With so many people struggling to feed their families, it is vital that we do everything we can to make sure people easily find the best prices. We found that not all retailers display prices as clearly as they should, which could be hindering people’s ability to compare prices across products.

“We are writing to these retailers and warning them to make the necessary changes or risk facing enforcement action. The law itself needs to be tougher here, so we are also asking the government to introduce reforms.”

He added: “We have also looked at how competition works in the grocery retail market more broadly. The general evidence suggests a better image than in the fuel market, with stronger price competition among all supermarkets and discount stores.

“In the next phase of our work, we will examine competition and pricing throughout the supply chain for the product categories we have identified. We will also continue to monitor the situation to ensure that competition remains effective as input costs begin to fall.”

The watchdog said it was recommending changes to the law to ensure retailers make price tags clearer after identifying a number of confusing practices. He said he had found inconsistent prices, with different measures used for similar types of products, such as the price of tea bags per 100g for some products and the price of others per tea bag within the same store, making it difficult to comparison.

The CMA said that in some cases unit prices were unreadable, missing or obscured, such as for online shoppers or in specific promotions.

Recommends that unit price regulations be amended to ensure that all promotional products, including multiple purchases and special prices for loyalty program members, display a unit price comparable to the standard price.

Other recommendations include ensuring that only one unit of measure per product type can be used at all retailers and across all sales channels, to allow shoppers to make meaningful comparisons; and ensure that prices are legible, not obscured and close to the products to which they refer. Retailers have been asked to ensure that private label products use the same unit pricing method, for example per 100ml or 100g, as similar branded items.

In June, the consumer group Which? reported Tesco to the watchdog for failing to provide detailed information on the prices of its Clubcard loyalty offers.

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A spokesman for Britain’s biggest supermarket chain said it had already confirmed plans to introduce unit prices on “simple promotions” early next year. Tesco said: “We support the CMA’s recommendation to clarify guidance on unit prices to provide customers with more transparency.”

Helen Dickinson, chief executive of the British Retail Consortium, said fierce competition between British supermarkets was a key reason 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 brunt of rising supply chain costs. In recent months, some of these pressures have begun to ease, such as global commodity prices and the weakness of the pound, and we are now seeing competition drive down the price of key commodities.”

Asda received a rebuke from lawmakers on Wednesday after its co-owner Mohsin Issa refused to answer multiple questions about whether fuel profit margins had risen 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 suit.

Asda was summoned by MPs to answer questions after a report on the UK fuel market found drivers had paid around £900m more at the pump since 2022 after retailers widened their profit margins by 6 pence per litre.

On Thursday, Asda announced an average price cut of 9% on just over 200 everyday grocery items.

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