UK regulator to review supermarket loyalty scheme prices

Britain’s antitrust regulator said it would launch a review of loyalty scheme pricing by supermarkets, such as Tesco’s (TSCO.L) Clubcard and Sainsbury’s (SBRY.L) Nectar, to consider whether it was fair that cheaper prices were available only to members.

Loyalty schemes have proved hugely successful for the UK’s major supermarkets, offering much lower pricing for members.

The vast majority of customers now use them, and an increasing number of products come under the schemes – over 8,000 at market leader Tesco.

“We have … seen an increase in the use of loyalty scheme pricing by supermarkets, which means that price promotions are only available to people who sign up for loyalty cards,” Sarah Cardell, CEO of the Competition and Markets Authority (CMA), said on Wednesday.

“This raises a number of questions about the impact of loyalty scheme pricing on consumers.”

The CMA’s review will begin in January 2024.

Updating on its review of the whole sector, the CMA also said it had found some branded suppliers had pushed up prices by more than their costs increased, but in most cases, shoppers could find cheaper alternatives.

It did find one area of concern, however, saying ineffective competition in the baby formula market could be leading to parents paying higher prices.

It said it would further examine this market as there was little evidence that people were switching to cheaper baby formula products and limited own-label alternatives.

Having ruled in July that Britain’s high food price inflation had not been driven by weak competition among supermarkets, the CMA examined whether weak or ineffective competition in other parts of the groceries supply chain, or in specific product categories, could be contributing to price inflation.

It looked at 10 product categories – baby formula, baked beans, bread, chilled desserts, lemonade, mayonnaise, milk, pet food, poultry and ready meals.

UK food price inflation reached its highest since 1977 in March at more than 19 per cent, according to official data. By October it had slowed to 10.1 per cent, but is still a major strain on the finances of many households.

Shares in Tesco and Sainsbury’s were flat in early trading.