Supermarkets are being investigated by the competition watchdog over high food and fuel prices.

The Competition and Markets Authority (CMA) said it would look at whether a "failure in competition" meant customers were overpaying.

Supermarkets said they were working to keep food prices "as low as possible".

But an investigation into the fuel market, which has already started, has found some supermarkets have increased margins on petrol and diesel.

The CMA said evidence suggested at least one supermarket had set a higher target for its margin on fuel prices in 2022, which could have led to rivals following suit and raising prices too.

Asda said it would work "in full co-operation" with the CMA and added it was "focused on providing our customers with the best value at the pumps".

Food prices

Andrew Opie, director of food and sustainability at the British Retail Consortium, told the BBC that supermarkets were "confident" that they were "doing all they can to keep food prices as low as possible".

"The UK has one of the most competitive markets for food in the world, and as global prices begin to fall we are confident that the competitive nature of the industry will help food inflation fall as a result," he said.

Higher food prices have been hitting households hard in recent months, and some have questioned why a drop in the cost of wholesale food globally has not led to falls in the prices charged by UK supermarkets.

Supermarkets have said there is typically a three to nine-month lag to see price falls reflected in the shops.

The war in Ukraine has driven up food prices around the world, and the UK has faced other problems on top of this - from Brexit red tape to labour shortages.

CMA chief executive Sarah Cardell, said the watchdog recognised that "global factors" were behind many grocery price increases and said it had seen "no evidence at this stage of specific competition problems".

Stepping up work

She added that, due to concerns about high prices, the CMA was "stepping up our work in the grocery sector to help ensure competition is working well and people can exercise choice with confidence".

Ms Cardell said the watchdog was "concerned about the sustained higher margins on diesel compared to petrol we have seen this year".

She said her team was not satisfied that all the supermarkets had been "sufficiently forthcoming with the evidence" on fuel pricing, and said bosses would be called in for formal interviews to "get to the bottom of what is going on".

The CMA said that, although supermarkets still tend to be the cheapest retail suppliers of petrol and diesel, evidence indicated "at least one supermarket" had significantly increased its margin targets last year.

"Other supermarkets have recognised this change in approach and may have adjusted their pricing behaviour accordingly," the watchdog added.

The CMA noted while Russia's invasion of Ukraine had caused prices to rise, higher pump costs could not be "attributed solely to factors outside the control of the retailers".

Weakening of competition

It said the higher prices at the pumps appeared to be in part due to "some weakening of competition" in the UK fuel retail market.

A review of the fuel market has been ongoing for several months, over initial concerns that retailers and forecourts were failing to pass on a 5p fuel duty cut to motorists.

Motoring groups claimed the findings from the CMA confirmed what they had been campaigning on for some time - that drivers were not getting a fair deal.

In December, the CMA said it found evidence that so-called "rocket and feather" fuel pricing happened in 2022, when fuel prices rise as wholesale costs rise, but then fall more slowly than costs come down.

"If ever a business sector needed a major shake-up, it's the fuel trade - critical to the cost of living, family finances, transport costs and inflation," said Edmund King, president of the AA.

Simon Williams, fuel spokesman for the RAC, added: "Something badly needs to change to give drivers who depend on their vehicles every day a fair deal at the pumps. We hope even-better news will be forthcoming later this summer."

  • Rishi Sunak is to meet with food industry leaders today.

The Prime Minister will host a "farm to fork" summit with delegates from farming, food production and supermarkets.

They are expected to discuss how the UK can improve the way it produces and sells food, and boost production.

More like this…

View all