Subscribe to receive updates from the Competition & Markets Authority
Stay informed with our daily email digest, myFT Daily, which covers the latest news from the Competition & Markets Authority.
The UK competition watchdog has revealed that Asda and Morrisons have increased their fuel margins since being acquired by private equity firms. This has prompted concerns about reduced competition and higher costs for motorists.
The Competition and Markets Authority (CMA) stated that the two retailers have significantly widened the gap between their fuel purchase costs and the prices at which they sell to customers. Supermarket fuel margins have increased by six pence per litre between 2019 and 2022.
In response to the CMA’s call for greater market transparency, the government has pledged to establish a new scheme that enables motorists to compare pump prices for petrol and diesel in real time. Chancellor Jeremy Hunt emphasized the importance of treating consumers fairly and empowering them to find the best fuel prices.
The CMA conducted a comprehensive review of the road fuel market following the surge in pump prices related to Russia’s conflict with Ukraine. On July 4, 2022, diesel prices reached a record high of 199.2p per litre, resulting in significant costs for drivers.
The CMA identified a clear trend of rising fuel margins for retailers since 2019. Supermarkets’ average annual fuel margin increased from 4.6p per litre in 2019 to 10.8p per litre in 2022. This rise translated to an additional £900 million in costs for customers of Asda, Morrisons, Sainsbury’s, and Tesco.
Asda and Morrisons, known for their cost-cutting approaches, possess significant market influence. Asda’s target margin for 2023 is more than three times higher than in 2019, while Morrisons’ margin has doubled over the same period.
An internal document from a competitor attributed the less competitive pricing approach of Asda and Morrisons to changes in ownership. Asda was acquired by the Issa brothers and TDR, while Morrisons was purchased by Clayton, Dubilier & Rice.
The CMA did not find evidence to suggest that the pricing strategy change was driven by the new owners. However, other retailers have also raised prices, indicating weakened competition.
To promote price transparency, retailers will be required to provide up-to-date price information, enabling third parties to develop apps or price comparison websites. Asda stated that their presence in local areas helps keep prices down for all motorists.
Despite the increase in margins, Morrisons emphasized its competitiveness on fuel pricing and mentioned that it used the modest increase in profitability to maintain and reduce in-store food prices. Tesco stated its commitment to providing customers with competitive fuel prices and monitoring prices at both local and national levels. Sainsbury’s did not respond to requests for comment.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
