Watchdog finds little evidence supermarket loyalty prices mislead shoppers

The competition regulator’s ongoing review of supermarket loyalty prices is unlikely to identify widespread evidence of promotions that mislead shoppers, the watchdog said on Friday.

Loyalty schemes have proved hugely successful for the UK’s biggest supermarkets, offering significantly lower prices for members. The vast majority of customers now use them and an increasing number of products are covered by them.

The Competition and Markets Authority (CMA) launched a review in January to consider the impact on shoppers of the schemes used by supermarkets that offer cheaper prices only to loyalty card members. Market leader Tesco and No.2 Sainsbury’s are among those who offer such schemes.

The watchdog considered whether there are pricing practices that indicate the non-loyalty, or non-member, price may have been artificially inflated to make the loyalty price appear misleadingly attractive.

It looked at what happens to prices before, during and after a product goes on a loyalty price promotion.

“Our analysis – involving tens of thousands of loyalty price promotions – is  ongoing, but the results to date suggest we are unlikely to identify widespread evidence of loyalty promotions that mislead shoppers in this way,” the CMA said.

But the regulator said it had seen examples of retailers alternating between so-called “was /now” promotions available to all shoppers and loyalty price promotions.

“This raises questions as to what the ‘regular’ price is for the product and therefore whether the claim saving for the ‘was /now’ promotion is genuine,” the CMA said, adding that it was examining the issue further and planned to publish a full report in November.

The British Retail Consortium, which represents the major supermarket groups, welcomed the CMA’s update, saying grocers know they have to demonstrate value to retain customers.

Tesco, which has a 27.7 per cent share of the UK grocery market, currently offers more than 8,000 Clubcard Prices deals each week. Sainsbury’s, which has a 15.3 per cent market share, has rolled out Nectar Prices to about 7,000 products.

Separately on Friday, the CMA said competition in UK grocery appears to be effective in bearing down on profit margins, with the average operating margin for supermarket groups less than 3 per cent in 2023/24.

However, it added that UK drivers were still paying too much for road fuel and consumers could be paying too much for infant formula. It plans to report on the latter in October.

(Reuters)