The Competition and Markets Authority (CMA) has written an open letter to grocery retailers urging them to ensure they are complying fully with their obligations under the Price Marking Order 2004 (PMO) and related legislation.
Over the past two months, the CMA has assessed how retail competition is working in the UK grocery sector, particularly between supermarkets, as well as discounters. Looking at the effectiveness of retail competition across the market, this stage of the CMA’s review has focused on the extent to which rivalry between retailers ensures they keep their prices as low as possible and whether consumers can shop around to get the best deals.
The CMA found that some of the problems stem from the unit pricing rules themselves, which allow unhelpful inconsistencies in retailers’ practices and leave too much scope for interpretation, and as a result, shoppers may be finding it hard to spot and compare the best deals. The CMA is also recommending that the PMO needs to be tightened up.
In its open letter to grocery retailers, the CMA said: “Grocery retailers should review their unit pricing practices in light of our report. We expect that where grocery retailers identify practices that fail to meet the clear and unambiguous requirements of the PMO, they will take immediate action to correct them.
“In addition, we are calling on all grocery retailers to give shoppers the unit pricing information that they need to make meaningful comparisons, particularly for products on promotion, ahead of any reforms to the PMO. Doing so will ensure that grocery retailers are also complying with the Consumer Protection from Unfair Trading Regulations 2008, which require retailers to give consumers material information in a manner that is not misleading.”
The CMA expects grocery retailers to:
- ensure that they unit price all their products of the same type using the same metric;
- display the unit price of each product clearly next to the product and selling price instore and online;
- give unit prices for products on promotion for all types of promotions where this is feasible. For example, for price reductions, promotions where a loyalty price is presented alongside a standard selling price, and multi-buy promotions for products of the same price and size across both in-store and online;
- review staff practices, procedures and training so that mistakes in unit price labelling do not occur.
The CMA said it will continue to monitor unit pricing practices in this sector and if it identifies examples of continuing non-compliance it will consider whether enforcement action is necessary.
Sarah Cardell, Chief Executive of the CMA, said: “We’ve 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.”
In response, ACS Chief Executive James Lowman, said: “This is a timely and important report that looks at the business costs and pressures that have driven inflation for consumers. The UK has a highly competitive grocery market in which convenience stores play an important part, especially in rural and isolated communities.
“The conclusion that policy-makers should draw from this report is that the best way to promote lower prices for consumers is to help retail businesses to navigate a period when their costs are extraordinarily high.”
