The Government will investigate whether supermarkets might be to blame for driving up food prices via ‘greedflation’, after finding that they are charging an extra 5p per litre on petrol and diesel even after accounting for factors like the invasion of Ukraine.
The Competition and Markets Authority (CMA) - the Government’s anti-monopolies watchdog - issued an update on Monday on a study into petrol and diesel prices, while also announcing a new probe into the groceries market.
On road fuels, the CMA said that Russia’s invasion of Ukraine may be the largest factor behind price rises, but higher prices “cannot be attributed solely to factors outside the control of the retailers”.
“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 said.
It said that average 2022 supermarket pump prices “appear to be around 5 pence per litre more expensive than they would have been had their average percentage margins remained at 2019 levels”.
The CMA added that supermarket had not been “sufficiently forthcoming with the evidence they have provided” during the investigation.
The watchdog also announced a new probe into grocery prices, which have skyrocketed in recent months.
“While global factors have also been the main driver of grocery price increases, and at this stage the CMA has not seen evidence pointing to specific competition concerns in the grocery sector, it is important to be sure that weak competition is not adding to the problems,” it said.
“While global factors have also been the main driver of grocery price increases, and at this stage the CMA has not seen evidence pointing to specific competition concerns in the grocery sector, it is important to be sure that weak competition is not adding to the problems.”
Sarah Cardell, Chief Executive of the CMA, said: “Grocery and food shopping are essential purchases. We recognise that global factors are behind many of the grocery price increases, and we have seen no evidence at this stage of specific competition problems.
“But, given ongoing concerns about high prices, we are stepping up our work in the grocery sector to help ensure competition is working well and people can exercise choice with confidence.”
The CMA’s findings on the road fuel market will likely trigger further claims that big companies are profiting off the cost-of-living crisis via ‘greedflation’.
However, Michael Saunders, senior economic advisor at Oxford Economics and a former member of the Bank of England’s Monetary Policy Committee, noted in a research note published today that signs of the phenomenon appear to be much rarer outside of the world of fuel.
“Take out oil and gas, where profits have risen sharply, and the share of company profits in GDP has fallen markedly,” he said. “Sure, it's possible to find individual cases of widening corporate profits, but these do not reflect the overall picture in our view.
“Clearly, the exceptional price rises of a few companies do not reflect the general pattern, with profits of both manufacturing and service sector firms falling as a share of turnover and aggregate GDP.”