Competition watchdog begins review of supermarket loyalty pricing

The competition watchdog is reviewing whether supermarket loyalty pricing misleads or disadvantages shoppers.

The Competition and Markets Authority (CMA) said the increase in some supermarkets making cheaper prices only available for loyalty card members has led to it examining the practice as part of its work to help tackle cost-of-living pressures in the groceries sector.

It said it will consider whether any aspects of loyalty pricing could mislead shoppers – for example, whether the loyalty price is a genuine promotion or as good a deal as presented – and whether any groups of shoppers are disadvantaged by the promotions.

It will also look at whether loyalty pricing is affecting consumer behaviour, and whether this has an impact on how supermarkets compete with each other.

The CMA said it will publish an update on its work in July, and expects to complete the review by the end of the year.

The CMA has also launched a drive encouraging people to use unit pricing to help their grocery budget go further, including a short guide for shoppers explaining what unit pricing is and how it can help people identify the best-value grocery items.

It follows research by the watchdog which found that understanding and use of unit pricing varied greatly among those who took part in the study.

Unit pricing displays the cost of products by weight or volume, and is meant to help consumers by allowing them to easily compare the relative value of similar items.

The term “unit pricing” was not generally recognised among shoppers surveyed, while around half of those who took part in the research used unit pricing – to varying degrees – and half did not.

The shoppers who used unit pricing found it a helpful tool to compare the prices of different products and get value for money.

George Lusty, senior director for consumer protection at the CMA, said: “Food prices have risen over 27% in the last two years and everyone is on the lookout for ways to save money on their grocery bills.

“Unit pricing – that small text underneath the main selling price – is a great way to compare brands and sizes to make sure you’re not spending more money than you need to on groceries.

“There is still work to be done to ensure shoppers are getting the most out of unit pricing, including consistent product measurements and clear and upfront pricing. So it’s good news that the Government has accepted the CMA’s recommendation to strengthen the law in this area.”

Which? head of food policy Sue Davies said: “This latest update by the CMA reinforces how important unit pricing can be to help shoppers identify which products offer the best value on the supermarket shelf. It also shows that using ‘rules of thumb’ such as buying bigger packs or products on promotion doesn’t always guarantee the best price.

“Which? research has consistently shown that unit pricing is not always clear enough, can be presented inconsistently and is not always shown on promotions or loyalty pricing, making it really difficult for people to easily tell which product is the best value.

“It’s positive that last week the Government announced plans to revise dated pricing rules to help ensure that unit pricing is much easier to use. It’s crucial that progress on this comes as quickly as possible but that supermarkets in a position to make positive changes now – such as adding unit pricing to products on promotion – don’t wait for the rules to change.”

The CMA said in July that not all retailers were displaying prices as clearly as they should, which could be hampering people’s ability to compare products, following its investigation into how competition was working across the grocery retail market.

The watchdog said it was concerned that some supermarkets were using inconsistent unit pricing across similar products, making it hard for consumers to compare deals on a like-for-like basis, noting an example of tea bags priced per 100 grams for some products and per tea bag for others.

It had also found missing or incorrectly calculated unit pricing, such as a 250ml hand wash costing £1.19 but unit priced at £476 per 100ml, as well as pricing information unavailable online until items were selected.

Other labels were too small, or obscured by promotional information or shop fittings, and some retailers were not displaying unit prices for products on promotion.

The watchdog wrote to retailers warning them to make the necessary changes or risk enforcement action, and also called on the Government to tighten the law around pricing displays.

The Department for Business and Trade (DBT) announced last week that the Price Marking Order (PMO), which requires traders to display the final selling price, and where appropriate the final unit price – for example the price per kilogram – is to be reformed.

The DBT said proposed changes will ensure unit pricing is consistently applied, including to promotions and special offers, to help consumers compare products easily and identify which items represent the best value.