The cost of living crisis; CMA investigates the supermarkets

The Competition and Markets Authority is the regulator with the widest remit to investigate how market sectors are working and punish wrongdoing.

The powers of the CMA are set out in the Competition Act 1998. Broadly the Act is divided into concerted practices and cartels (Chapter 1 of the Act) and monopolistic behaviour (Chapter 2 of the Act).  The CMA has authority to investigate, to search without notice and to seize documents and equipment (Chapter 3). The powers to fine and impose interim measures are set out in Chapter 4 of the Act. The CMA can fine up to 10% of worldwide turnover of a company or group of companies.

With pressure growing on the Government and allegations against supermarkets that they have been making super profits on the back of consumers, the CMA has launched investigations into fuel and grocery prices.

The CMA has already published its concerns that supermarkets have not been wholly forth coming in giving evidence about fuel prices:

Whilst the level of engagement with the study has varied across supermarkets, we are not satisfied that they have all been sufficiently forthcoming with the evidence they have provided [CMA 15 May 2023]

The CMA has now turned its attention to groceries. The CMA has acknowledged global pressures and, in its latest update, has said it sees no evidence pointing to specific concerns in the grocery sector. Nevertheless, with political pressure growing, the CMA has decided to look at three specific areas in a focussed investigation in order to report by mid-July. To those of us more used to the 12-18 month process of investigation, this timetable appears tight. The three areas are:
  1. Competition between retailers,
  2. Competition between suppliers and
  3. Competition at the primary production stage.
The CEO of the CMA has said:

Grocery and food shopping are essential purchases. We recognise that global factors are behind many of the grocery price increases, and we have seen no evidence at this stage of specific competition problems. But, given ongoing concerns about high prices, we are stepping up our work in the grocery sector to help ensure competition is working well and people can exercise choice with confidence. [SARAH CARDELL CEO CMA]

I watched the CEOs of the major supermarket chains giving evidence this week. I was surprised and disappointed to hear one MP accuse the supermarkets of ‘grotesque profiteering’. This accusation was made under cloak of Parliamentary Privilege. There is no evidence to support such a claim from a competition law viewpoint. My view is supported by the CMA in relation to groceries, though I accept questions remain in relation to fuel prices.

Lawmakers insist on using the cloak of privilege to make accusations they cannot sustain by reference to any actual evidence. Care should be taken when making allegations without evidence in the face of an ongoing CMA investigation. In the UK, the accepted ‘norm’ is to investigate, find facts, and make allegations based on those facts. Our elected representatives seem keen to make the allegations and then hold the investigation to support their position.

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