The Competition and Markets Authority (CMA) published a report this month saying that drivers were paying more for petrol and diesel than before the Covid pandemic because of “weakened” competition.
The CMA told the committee there had been a “significant change” in the supermarket’s pricing approach after its £6.8bn takeover by the billionaire Issa brothers and their private equity partner in 2021. Asda is now set to buy the UK arm of the Issas’ EG Group petrol forecourts business for £2.27bn.
Dan Turnbull, the director of the CMA, told the committee that the chain had stuck with its strategy of being price leader but had altered course on two other aspects – increasing profit margins and to “deliberately feather” prices – or to take more time to react to drops in the wholesale price of fuel. He said this was particularly the case with diesel, where there had been a lot of volatility in prices.
“We found that between 2021 and 2023 they significantly increased their internal fuel margin targets on a pence per litre basis, and indeed by 2023 those pence per litre targets were three times what they’d been in 2019,” he said.
Issa reportedly refused to confirm whether that was the case, saying there were many elements that contributed to decisions on fuel pricing.
He insisted the group had not changed its strategy, saying Asda was “proud of being a price leader” and, while he refused to say directly whether the new management had increased profit margins on fuel, he suggested the group had, saying “we invested that margin into food”.
“We don’t see this as a fuel business on its own. We see this as a holistic business,” he said. The retailer’s overall profit margins had fallen from 2.7 per cent to 1.7 per cent under his ownership, Issa said. He insisted he was “absolutely in touch with where customers are coming from” having grown up in a “two-up, two-down” and said Asda had invested in keeping food prices down and in its loyalty scheme.