If so, do you trust that the loyalty discounts are as good as they seem, and that you are getting a good deal?
The Competition and Markets Authority (CMA) is working to make sure people get a fair deal as they continue to face cost of living pressures. As part of our work in the groceries sector, we’ve been investigating supermarket loyalty pricing and have today published the final report of our investigation.
As part of our investigation, we wanted to check:
whether promotions can be trusted
how promotions compare to prices available at other supermarkets
how accessible these promotions are
whether consumers are being treated fairly
We asked shoppers how they really feel about loyalty pricing, and found that:
68% think that loyalty prices offer good savings for members
26% said that loyalty pricing would make them more likely to shop at a particular supermarket
40% do not trust that the loyalty price is a genuine saving on the usual price for that product
55% said they think that non-member prices during a loyalty price promotion are generally higher than the price usually charged for the product
We analysed around 50,000 grocery products on loyalty price promotions and found very little evidence of supermarkets inflating their usual prices to make loyalty promotions seem like a better deal.
Our messages to shoppers:
Loyalty prices offer genuine savings
Our findings reveal shoppers can make an average saving of 17 to 25% compared to the usual price when buying loyalty priced products at the 5 supermarkets examined (Tesco, Sainsbury’s, Waitrose, Co-op and Morrisons).
Shop around for the best deal
Are you a bargain hunter? We found loyalty prices typically beat other supermarkets’ regular prices and are often similar to other promotional prices. But we also saw examples of other promotions and regular prices being cheaper for some products so shop around to find the best deals.
Our messages to supermarkets
Supermarkets should:
read our advice on how to help them stay on the right side of the law
make sure none of their loyalty price promotions have the potential to mislead shoppers
consider whether they could do more to make sure that those under 18, customers without smartphones, and people without fixed addresses are not prevented from joining loyalty schemes and accessing cheaper loyalty prices
A speech delivered by Martin Coleman, Inquiry Chair for the CMA’s market investigation into veterinary services for household pets at the BVA Congress at the London Vet Show:
Introduction
As an owner of cats and dogs for many years – I currently have a very energetic Sprocker spaniel – I have great respect for veterinary professionals and the care they give, sometimes in very pressured and emotive circumstances. Nothing we have seen or heard in our inquiry so far has caused me to have doubts about the care and professionalism of the vast majority of veterinary professionals.
The focus of our inquiry is not on that but on how veterinary services for pets are bought and sold – whether there are aspects of that process, or the market structure itself, that are not working as well as they might to provide competitive services to consumers
Competition and animal welfare
And competition is important, not only to ensure that clients get good services at fair prices, but to the animals whose health and welfare is rightly at the heart of veterinary practice. In a service that is, in the main, commercially operated, the welfare of animals is closely connected to the means of owners to pay for diagnostics, medicines and treatments. To state the obvious, the health and welfare of animals cannot be effectively protected if owners are unable to meet the costs of doing so. Competitive markets keep prices down and, importantly, incentivise investment and innovation in different treatments and business models. There is a clear connection between protecting the health and welfare of animals and seeking to ensure that markets for veterinary services are working well.
This connection between effective competition and the ability of patients to access clinical services and medicines is perhaps less apparent in the UK than in some other countries because human medical services, for most patients, are available without charge and NHS medicines are provided at standardised prices and, in some cases, free. So clients have no point of comparison when faced with the price of veterinary services and vets have less external context to judge the role of competition in a clinical setting
Context of the investigation
While the provision of veterinary services has, in large part, always been a business, recent developments including increased corporate ownership of vet practices, price rises and questions about the nature and extent of treatments offered have raised questions about whether competition is working as effectively as it might to help contain costs, improve quality and encourage innovation in the interests of consumers and the animals that they own. This was the context in which our market investigation was set up.
We have yet to determine whether such concerns are justified. And, even if they are, we shall seek to understand whether they may be connected. As all good scientists know, correlation is not the same as causation.
There might for example be a causal link between increased corporate ownership and price increases but equally the two may not be connected and there may be other factors at play including a reduction in the number of vets following Brexit and the increase in pet ownership in recent years.
Changes in the nature and intensity of treatment may be an indication of new commercial profit-maximising strategies but may, for example, reflect developments in technology and changing pet owner perceptions of what is best for their animals.
Our job is to get to the bottom of how the market is working – allegations are one thing, hard evidence is another and we are interested in the evidence.
The process
We are now almost a third of the way through our market investigation. Although we have not been able to say much publicly yet, because we are assessing the evidence and forming our views, we have been very busy. It is a long process because we take the responsibility of exploring the veterinary sector very seriously, and we want to base any action we take – or recommendations we make – on a thorough look at the evidence, allowing enough time to engage with key stakeholders including, of course, the veterinary profession.
We have therefore invested a lot of time in engaging with the profession and its clients to get a full picture of how the sector works. We have held teach ins with, and been on site visits to, each of the large corporate groups, as well as site visits at independently owned practices. We have had the chance to talk formally and informally with senior executives and the people on the ground and with representative bodies.
We have held roundtables with veterinary professionals from different backgrounds including the heads of vet schools, chief veterinary officers at charities, vet nurses, students and newly established vets. We have had discussions with consumer groups, animal charities and regulators.
These have been hugely valuable in giving us an understanding of the challenges facing the sector, the complexities of professional life and business, the experience of consumers and the possibilities for change. Thanks to all who have been part of that process. This engagement will continue as we progress the investigation and in particular will include discussions on any remedies we consider may be appropriate to address any concerns we identify.
Gathering evidence, and then analysing it properly and fairly, takes time – particularly in a complex professional setting.
We have requested information from vet businesses (small and large), including on profitability and business strategies.
We are looking at data on prices charged and treatments bought.
We are mapping all the vet practices in the UK and who owns them for every local area. We have commissioned research – both interviews with veterinary professionals and a survey of pet owners.
We are seeking to understand how the medicine supply chain impacts consumer prices.
We are reviewing the relationships between first opinion practices and referral services and out of hours services and how this may impact consumers.
Later in the process we shall be holding a number of formal hearings.
We are very aware that this is an area of some complexity, and we shall need to assess all the potential consequences of any interventions we are considering We shall consider how far potential remedies are aligned with our statutory responsibilities, workable for the profession and its clients and contribute to the outcome that we all want – a market where competition works well with consumers getting a choice of good quality services at fair prices and providers receiving an appropriate return for their investment and service.
This is why we place such importance in our process on hearing your views and consulting with the sector, the profession and pet owners as we develop any potential remedies.
I know that such a significant investigation creates uncertainty, although I would remind you that the inquiry is in part a response to concerns that have been expressed about veterinary services, not the cause of those concerns. We have not yet reached any conclusions on how well the market is operating; but whether the eventual conclusions are that all is well, or that there are areas of concern which we would seek to address, I would hope that the result will contribute to the further building of confidence in a profession consisting of hard working dedicated and committed practitioners performing important work.
Regulation
One theme common to nearly all we have spoken to, including the RCVS, is that the regulatory system needs reform to better serve the profession and the public. I used to be a practising solicitor and sat as a member of the board of the Solicitors Regulation Authority, so I know from my own experience that a well-functioning market in professional services requires regulation.
A race to the bottom is not in the interests of animals, owners or the veterinary profession, and it is the job of regulation to ensure that this does not happen. And changes to regulation might help address some of the challenges faced by the sector, for example by widening the range of procedures that veterinary nurses can be authorised to perform – this is something we shall need to think about.
More broadly it is legitimate to ask whether regulation is too lax or too intrusive; its scope too broad or not wide enough; whether there are more proportionate ways of achieving desired outcomes; whether the current regulatory structure is optimal in protecting public interests and whether the regulatory system gives proper weight to the interrelationship between animal welfare, the needs of consumers and the benefits of a competitive process.
These are issues we are considering and will be taken into account in any recommendations on regulatory reform that we make to the government for them to consider taking forward.
Medicines
An example of the interplay between animal welfare, competition, cost and regulation concerns medicines. We have heard veterinary professionals, and their clients, indicate frustration with certain aspects of the way that medicines are supplied, purchased and regulated.
Some of the important issues around medicines we are considering include:
the options available to pet owners when buying animal medicines, and how much they know about these
the barriers to telemedicine and remote prescribing, for both vets and pet owners
the discounts and other terms available to independent vets and larger vet groups from medicines manufacturers and other suppliers
the role of generic prescribing
the mark-ups on medicines and whether these mark-ups influence consultation fees charged by vets and, if so, what this might mean for competition
We have heard concerns about the high cost of certain drugs licensed for animals compared to the drugs’ human equivalents and about very large price increases when branded versions of medicines for animals have been authorised. We have been told by some vets that they are frustrated by the lack of flexibility in the Cascade, which, among other things, sets out the circumstances in which a human medicine may be prescribed or recommended for animal use.
These are a particularly acute problems for some pet owners, given recent cost of living pressures and the rising costs of caring for a pet. Vets told us that in some cases – and more than they would like – pet owners are not able to afford the drugs with an animal licence and therefore animals are remaining untreated – or even being euthanised – when they could be treated if vets could prescribe cheaper human medicines but they believe that they are forbidden from doing so.
It is not our job to second guess the clinical, scientific and public health judgments of the specialist regulators. We know that there are good reasons for prescribing medicines specifically manufactured for animal use, such as targeted dosing and the supporting pharmacovigilance regime to ensure continued safety. But it is our role to ask whether the regulatory process gives appropriate consideration to competition and the impact of that on consumers and prices (which may have implications for animal welfare). Albeit the view we ultimately take may be that there are parts of medicines regulation that involve expert judgments, and public policy considerations, that are for specialist regulators and elected government to assess.
And there may be things that can be done to improve matters even before we report. Government policy has been that cost alone is not a sufficient reason to move straight to prescribing a human medicine under the Cascade and we respect that. However, might it, for example, be possible for the Veterinary Medicines Directorate and the RCVS (who effectively police Cascade use) to work together to give guidance to vets on circumstances where, if a pet owner clearly cannot afford an animal medicine with the consequence that an animal would go untreated, a vet would be safe to prescribe or recommend a cheaper human equivalent in order to protect the health and welfare of the animal?
Informed consumers and treatment intensity
For the market to work well, consumers must be appropriately informed about the choices they can make when selecting a veterinary practice, whether that be a first opinion practice, a referral centre or an out of hours service, and when considering diagnostic options and treatments.
This is not just a matter of cost but also because, in similar circumstances, each owner will have their own views about what is best for their pet, and each vet and practice will have distinct capabilities. We are considering whether the information consumers have at different stages of their animal care journey facilitates good decision-making and how far pet owners are in a position to act on those decisions.
This does not mean that dealings between a vet and client are, or should be, purely transactional. Relationships, trust and confidence matter, and we have heard this consistently from vets and clients. But this is not an either/or debate – appropriately informed consumers making choices versus trusted relationships. The two are connected. Trust can be built and retained if consumers know that their vet, and the recommendations the vet makes, are the best for them in their particular circumstances.
We have heard about the increasing sophistication in diagnostics and treatments. There is a debate around how best to handle the challenge of ensuring that pet owners are properly informed at the right time about the choices available while receiving appropriate guidance and support on sometimes very complex options. One approach that has been much discussed is contextualised care, to tailor what a vet offers to the specific needs of the pet and its owner.
A number of vets have told us that contextualised care is a new term for what good vets have always done. Others have said that it is a valuable new focus for good practice. We have also been told, by vets who work in the charity sector, about pragmatic care, which can be thought of as aiming to capture much of the benefit of the increasingly sophisticated treatments available at a reasonable cost.
We are looking into these trends in diagnostics and treatments and what they mean for competition, pet owners and animal welfare.
Conclusion
What happens next? We’re preparing a series of (what we call) working papers, where we set out the evidence we have gathered so far and our initial analysis of what this shows. These will be published in a few months and will give interested people and businesses a chance to see how our thinking is developing and the opportunity to comment.
We are expecting to publish our provisional conclusions in early summer next year, when we shall be consulting on what we have found and what we are considering doing about it. This might include making orders that are directly binding and recommendations for change which would be for others to consider and implement.
As I said we are very keen to get the views of the profession on the topics we are considering and, in that spirit, I am looking forward to hearing the panel discussion during the second part of this session.
The Inquiry Group – made up of independent experts who will lead the market investigation – has set out its areas of focus
Following the launch of its market investigation into the vets sector, and in line with our usual market investigation procedures, the Competition and Markets Authority (CMA) has today published an issues statement which sets out the Inquiry Group’s initial theories on what might be affecting competition in the sector and the potential solutions or ‘remedies’ that could be considered.
These reflect the concerns and potential remedies set out during the CMA’s market review. The issues statement covers the types of further evidence the Group plans to collect in order to test these theories and explore any remedies needed.
The issues statement does not set out any findings or conclusions at this early stage of the investigation – it is for the Group to determine whether there are competition concerns in the market and how best to address them.
In determining its initial areas of focus, the Group – chaired by Martin Coleman – has considered all the work carried out so far, including evidence gathered during the market review and responses to the consultation on whether to launch a market investigation.
The Group will gather a wide range of evidence including information from veterinary professionals and businesses of all sizes, suppliers to those businesses, regulators and pet owners. The Group plans to hold hearings and roundtables, visit veterinary practices and referral hospitals to understand the vet sector more fully, and publish working papers to share its emerging thinking at certain points in the investigation.
At this early stage in the investigation, publishing this issues statement will assist those submitting evidence to focus on the issues the Group is most concerned about. As the investigation progresses, further issues may be identified.
The CMA must generally conclude a market investigation within 18 months from the date that the reference is made (with a potential additional 6 months for putting remedies in place) and the final report is expected by November 2025 at the latest.
The consultation on this issues statement is open until midnight on 30 July 2024 and responses should be sent to vetsMI@cma.gov.uk. The Group will consider the views it receives as part of its ongoing investigation.
For more information, including the full administrative timetable and members of the Inquiry Group, visit the Vets case page. This page includes a video to Martin Coleman, Chair of the Inquiry Group and a member of the case team, answering questions about the investigation.
The Investigation timeline so far:
The CMA launched a market review on 7 September 2023.
A consultation on the proposal to launch a market investigation reference opened on 12 March 2024.
On 23 May 2024, the CMA, in exercise of its powers under sections 131 and 133 of the Enterprise Act 2002 (the Act), launched a full market investigation in relation to the supply of veterinary services for household pets in the United Kingdom.
The Royal College of Veterinary Surgeons (RCVS) has welcomed the Competition and Market Authority’s (CMA) announcement of its decision to proceed with a formal market investigation into veterinary services in the domestic pet market, and continues to recognise the strength and breadth of feeling expressed by members of both the animal-owning public and the veterinary professions in the CMA’s initial review.
In particular, with no current legal powers to regulate veterinary practices (only individual vets and vet nurses), the RCVS shares the CMA’s concern that the current regulatory framework is out of date and might be preventing the market from functioning as well as it could.
Having sought modernisation of the College’s regulatory framework through new legislation for some considerable time, to include new mandatory regulation of veterinary practices, the College is now looking forward to working closely with the CMA to help effect the necessary legislative change by government.
Speaking shortly after the CMA’s announcement, RCVS President Dr Sue Paterson, commented: “As we said in March, we recognise that the large response to the CMA’s initial survey reflects an overall desire for change amongst animal owners and veterinary professionals alike to some parts of the veterinary sector, so we support the CMA’s decision now to proceed with a market investigation.
“Whilst it is not in our remit as a professional regulator to influence business structures, local markets or price levels, we do understand the CMA’s concerns over clarity of medicines supply options and pricing information and are already working to make our existing professional guidance on these issues clearer and easier for vets and vet nurses to follow.
“We are particularly keen to work with the CMA to persuade government of the urgent need to modernise the Veterinary Surgeons Act, so that we have stronger powers to regulate veterinary practices as well as individual veterinary professionals, and are calling on political parties to commit to introducing new legislation in the next parliament, ahead of the forthcoming election.
“We remain very concerned, however, about the worrying spike in abusive behaviour and harassment by some animal owners towards vets, vet nurses and practice colleagues following media reporting of the CMA’s initial findings back in March.
“We sincerely hope not to see a repeat of this behaviour towards the extremely hard-working and conscientious veterinary professionals up and down the country, over 11,000 of whom responded to the CMA’s review, and who may themselves welcome its intervention.
“In the meantime, we look forward to working closely with the CMA to bring about veterinary legislative reform to modernise our regulatory framework and, via our newly-established CMA Working Group, we will be ready to provide as much information and insight into the veterinary sector as we are able.”
The CMA has today published its main concerns following an initial review into the veterinary sector
CMA provisionally decides it should launch a formal Market Investigation.
Initial review prompts over 56,000 responses from public and vet industry.
The review by the Competition and Markets Authority (CMA) highlights multiple concerns in the market, including:
Consumers may not be given enough information to enable them to choose the best veterinary practice or the right treatment for their needs.
Concentrated local markets, in part driven by sector consolidation, may be leading to weak competition in some areas.
Large corporate groups may have incentives to act in ways which reduce choice and weaken competition.
Pet owners might be overpaying for medicines or prescriptions.
The regulatory framework is outdated and may no longer be fit for purpose.
The CMA has provisionally decided that it should launch a formal Market Investigation focused on its provisional analysis of the issues in the sector and is now consulting on this proposal.
A Market Investigation enables the CMA to investigate its concerns in full and to intervene directly in markets if it finds that competition is not working well. Along with compelling those under investigation to provide information, it gives the CMA access to a wide range of legally enforceable remedies, such as mandating the provision of certain information to consumers, imposing maximum prescription fees and ordering the sale or disposal of a business or assets.
Sarah Cardell, Chief Executive of the CMA, said: “We launched our review of the veterinary sector last September because this is a critical market for the UK’s 16 million pet owners.The unprecedented response we received from the public and veterinary professionals shows the strength of feeling on this issue is high and why we were right to look into this.
“We have heard concerns from those working in the sector about the pressures they face, including acute staff shortages, and the impact this has on individual professionals. But our review has identified multiple concerns with the market that we think should be investigated further.
“These include pet owners finding it difficult to access basic information like price lists and prescription costs – and potentially overpaying for medicines. We are also concerned about weak competition in some areas, driven in part by sector consolidation, and the incentives for large corporate groups to act in ways which may reduce competition and choice.
“Given these strong indications of potential concern, it is time to put our work on a formal footing. We have provisionally decided to launch a market investigation because that’s the quickest route to enable us to take direct action, if needed.”
The CMA’s concerns
Based on the evidence gathered so far, the CMA has 5 key concerns that it proposes to investigate further:
Consumers may not be given enough information to enable them to choose the best veterinary practice or the right treatment for their needs.
Most vet practices do not display prices on their website – of those practices checked, over 80% had no pricing information online, even for the most basic services. Pet owners tend not to shop around between vet practices and assume prices will be similar, although that is not always the case.
People are not always informed of the cost of treatment before agreeing to it – around one fifth of respondents to the CFI said that they were not provided with any cost information before agreeing to tests, around one in 10 said they were not provided with cost information before their pet had surgery, and around half said they were not informed about costs before agreeing to out of hours treatment.
A company can own multiple vet practices in a local area without making that clear – for example, only 4 out of 6 of the largest groups don’t change the name or branding when they take over an independently owned vet practice. This means pet owners are not always comparing competitors when choosing a vet practice.
Concentrated local markets, in part driven by sector consolidation, may be leading to weak competition in some areas.
Market concentration measures how many competitors operate in a particular market – the fewer firms operating in a market, the more concentrated it is.
In 2013, around 10% of vet practices belonged to large groups, but that share is now almost 60%, and many of the large groups have expressed an intention to continue expanding their business through acquisition of independently owned practices.
To illustrate this another way, since 2013 1,500 of the 5,000 vet practices in the UK have been acquired by the 6 large corporate groups (CVS, IVC, Linnaeus, Medivet, Pets at Home and VetPartners).
This may reduce the number of business models in locations where most or all of the first opinion practices are owned by one large corporate group, giving less choice to consumers because they tend to choose practices close to home.
Large integrated groups may have incentives to act in ways which reduce choice and weaken competition.
Given the significant and ongoing growth of large corporate groups, the CMA is concerned that:
The large, integrated corporate groups (especially those whose business models include significant investment in advanced equipment) may concentrate on providing more sophisticated, higher cost treatments, meaning that consumers are less able to access simpler, lower cost treatments even if they would prefer that option.
To varying extents, the large vet groups have also bought businesses which offer related services such as specialised referral centres, out of hours care, diagnostic labs and/or crematoria. These large groups may have the incentive and ability to keep provision of these related services within the group, potentially leading to reduced choice, higher prices, lower quality and exit of independent competitors.
Pet owners might be overpaying for medicines or prescriptions.
Vets must use signs in reception or treatment rooms to tell customers that they can get a prescription for medicine and buy it elsewhere, but the CMA is concerned that these may not be effective. While it can be convenient to buy a medicine directly from the vet as part of a consultation, around 25% of pet owners did not know that getting a prescription filled elsewhere was an option – meaning they are missing out on potential savings, even with the prescription fee.
Some vet practices may make up to a quarter of their income selling medicines – so there may be little incentive to make pet owners aware of alternatives.
The current regulatory regime may contribute to concerns by restricting veterinary practices’ ability to source cheaper medicines online.
The regulatory framework is outdated and may no longer be fit for purpose.
The main regulation in the industry dates from 1966, before non-vets were able to own vet practices. It relates to individual practitioners, not practice owners or vet practices as businesses. This means that the statutory regulator, the RCVS, has limited leverage over the commercial and consumer-facing aspects of veterinary businesses, for example how prices are communicated or whether there is transparency about ownership of vet practices or related services.
The RCVS has put in place a Practice Standards Scheme which applies to the vet practice rather than individual vets. Only 69% of eligible practices have signed up to this voluntary scheme, meaning that almost a third of the market has not committed to this approach.
The provisional view is that outcomes for consumers could be improved if regulatory requirements and/or elements of best practice could be monitored or enforced more effectively.
Next steps
The CMA has launched a 4-week consultation to seek views from the sector on the proposal to launch a market investigation. The consultation closes on 11 April 2023 at which point it will consider the responses received and a decision will be made on how to proceed.
For further information visit the veterinary services case page. This includes the consultation document which sets out more details and statistics on today’s update.
A response from the British Veterinary Association to follow
The CMA has set out the latest findings and the next steps in its ongoing review of the groceries sector today
Some branded suppliers have pushed up prices by more than their costs increased, but in most cases, shoppers can find cheaper alternatives.
CMA to examine further whether ineffective competition in the baby formula market could be leading to parents paying higher prices.
CMA to launch review of loyalty scheme pricing by supermarkets, considering its impact on consumers and competition in the groceries sector.
The Competition and Markets Authority (CMA) has set out the latest findings and the next steps in its ongoing review of the groceries sector today.
It follows an initial assessment that focused on retail competition in the groceries sector published in July.
That assessment identified 10 product categories (including milk, baked beans and baby formula) for further analysis in a second phase of work, to gain a deeper understanding of competition across the supply chain, with a particular focus on branded and own label food suppliers.
Competition and price dynamics in the supply chain
Food price inflation continues to be at historically high levels, despite falling to 10.1% in October 2023.
Across the food and groceries sector, the CMA found that high inflation has been driven largely by rising input costs, particularly for energy and key agricultural inputs like fertiliser.
But the evidence collected by the CMA indicates that, over the last 2 years, around three-quarters of branded suppliers in products such as infant formula, baked beans, mayonnaise, and pet food have increased their unit profitability and, in doing so, have contributed to higher food price inflation.
However, own label products often provide cheaper alternatives with suppliers of these products earning lower profit margins and competing to win and retain contracts from retailers.
In all but one of the relevant product categories the CMA looked at, as food prices have risen, many consumers have switched away from brands towards own label alternatives, or reduced their consumption, leading to a decline in brands’ market shares and profits. This switching is positive for competition and allows those able to switch, to lessen the impact of high food price inflation.
Overall profit margins have fallen across most branded manufacturers since 2021, mainly because of a fall in sale volumes due to consumers switching to cheaper alternatives.
The CMA has also heard from leading brands that they are aiming to use any future reductions in their input costs to offer customers more promotions, rather than cut the standard price they charge supermarkets for their products.
Baby formula
Baby formula is a product category where different dynamics seem to apply. The prices for baby formula in the UK have risen by 25% over the past 2 years.
Similar to other products the CMA examined, evidence suggests that branded suppliers of baby formula have also increased their prices by more than their input costs. On top of this, the market is highly concentrated (2 firms have around 85% of the market share) and brands have maintained high profit margins over the last 2 years.
Unlike other products examined, there is little evidence of parents switching to cheaper branded options as prices have risen and very limited availability of own-brand alternatives.
Families could make significant savings of more than £500 over the first year of a baby’s life, through buying cheaper baby formula options. Regulation ensures that all baby formula products, including cheaper options, provide all the nutrients a healthy baby needs.
Despite this, the CMA is concerned that parents may not always have the right information, at the right time, to make effective choices. It is also concerned that suppliers may not have the right incentives to offer infant formula at competitive prices.
The CMA will now undertake further work to better understand consumer behaviour (including what influences choice) and barriers to entry and expansion for baby formula manufacturers and consider whether any changes to the regulatory framework could help the market work better.
An update on the CMA’s work into baby formula will be published in mid-2024.
Loyalty pricing
With the rise in some supermarkets making cheaper prices only available for loyalty card members, the CMA plans to begin a review of the use of loyalty scheme pricing by supermarkets in early 2024. The CMA’s work will consider how the growth in loyalty scheme pricing is affecting consumers and competition in the groceries sector.
Sarah Cardell, Chief Executive of the CMA, said: “Food price inflation has put huge strain on household budgets, so it is vital competition issues aren’t adding to the problem. While in most cases the leading brands have raised prices more than their own cost increases, own label products are generally providing cheaper alternatives.
“The picture is different when it comes to baby formula, with little evidence that people are switching to cheaper products and limited own label alternatives. We’re concerned that parents may not always have the right information to make informed choices and that suppliers may not have strong incentives to offer infant formula at competitive prices. We will investigate this further and consider whether changes to regulations are necessary to ensure parents can get the best deal possible.
“We have also 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.
“This raises a number of questions about the impact of loyalty scheme pricing on consumers and competition and the CMA will launch a review in January 2024.”
More information and the full report can be found on the CMA Groceries case page
The CMA is opening a review of how veterinary services are bought and sold amid concerns that pet owners may not be getting a good deal or receiving the information they need to make good choices
The Competition and Markets Authority (CMA) has launched a review looking at consumer experiences and business practices in the provision of veterinary services for household pets in the UK.
It will explore how well the market, worth over £2 billion in the UK, is working for pet owners including whether they are receiving the information they need at the right time to get appropriate treatment for their pets.
Almost two-thirds of households in the UK own a pet, with the number of pet owners having increased significantly during the Covid-19 pandemic.
The CMA is concerned that pet owners may not find it easy to access the information they need about prices and treatment options to make good choices about which vet to use and which services to purchase.
Households are under strain from the rising cost of living and it is important that pet owners get value for money from their vets – but figures suggest that the cost of vet services has risen faster than the rate of inflation, which is something that the CMA will be looking into as part of its review.
The ownership of vet practices has also changed in recent years – independent practices accounted for 89% of the UK veterinary industry in 2013, which fell to approximately 45% by 2021. In some cases, a single company may own hundreds of practices and it may be unclear to people whether their vet is part of a large group.
People may also be unaware if their vet is part of a group which owns other vet practices in their area or that the services which are being sold to them (such as diagnostic tests or treatments at a specialist animal hospital) are provided by that group. This could impact pet owners’ choices and reduce the incentives of local vet practices to compete.
The CMA is keen to hear more about pet owners’ and vet practitioners’ experiences of:
Pricing of services, including whether pet owners were aware of how much a treatment would cost, and how they pay for it (whether they pay themselves or via insurance)
How prescriptions and medication for pets are arranged and sold
Choosing a vet surgery and whether people are aware that their vet may be part of a larger chain which might also own other surgeries in the area
Using out-of-hours and emergency vet services where options might be limited
Sarah Cardell, chief executive of the CMA, said: “Caring for an ill pet can create real financial pressure, particularly alongside other cost of living concerns. It’s really important that people get clear information and pricing to help them make the right choices.
“There has been a lot of consolidation in the vet industry in recent years, so now is the right time to take a look at how the market is working.
“When a pet is unwell, they often need urgent treatment, which means that pet owners may not shop around for the best deal, like they do with other services. This means they may not have the relevant information to make informed decisions at what can be a distressing time. We want to hear from pet owners and people who work in the sector about their experiences.”
The CMA would like to hear from pet owners, veterinary surgeons, veterinary nurses, practice managers and veterinary businesses as part of this work. To get in touch please visit the case page.
The CMA will provide a further update on this review in early 2024, outlining the issues it has identified and its proposed next steps.
Evidence to date indicates high food price inflation has not been driven by weak retail competition, but competitive pressure is important as input prices fall
Next phase of CMA probe will examine competition and prices across the supply chain for the product categories identified
Rules on unit pricing should be tightened and retailers must comply to help shoppers compare prices easily
The Competition and Markets Authority (CMA) has today published an initial update on its ongoing work to tackle cost of living pressures in groceries with the publication of two reports: an assessment of retail competition in the groceries sector and a review of unit pricing practices across major retailers.
At a time when food and other grocery prices are rising it is crucial that people can be confident that competition is working effectively to keep price rises as low as possible and that people can shop around and compare prices easily and with confidence.
Groceries
Over the past two months, the CMA has assessed how retail competition is working in the UK grocery sector, particularly between supermarkets such as Asda, Morrisons, Sainsbury’s and Tesco as well as discounters, including Aldi and Lidl. Looking at the effectiveness of retail competition across the market, this stage of the CMA’s review has focused on the extent to which rivalry between retailers ensures they keep their prices as low as possible and whether consumers can shop around to get the best deals.
Although food price inflation is at historically high levels, evidence collected to date by the CMA indicates that competition issues have not been driving this.
In particular:
Operating profits in the retail grocery sector fell by 41.5% in 2022/23, compared with the previous year while average operating margins fell from 3.2% to 1.8%. This is due to retailers’ costs increasing faster than their revenues, indicating that rising costs have not been passed on in full to consumers.
Consumers are shopping around to get the best deals, and the lowest-price retailers – Aldi and Lidl – have gained share from their competitors. This suggests retailers are restricted in their ability to raise prices without losing business.
However not everyone is able to benefit fully from strong competition, particularly those who cannot travel to large stores or shop online, and therefore may rely on higher-priced convenience stores.
Now that some input costs are starting to fall, there are some signs that grocery retailers are planning to start rebuilding their profit margins. The CMA will monitor this carefully in the months ahead, to ensure that people benefit from competitive prices as input costs fall.
The CMA’s review so far has focused on overall indicators of effective retail competition. It has not yet examined competition for individual product categories or across the wider grocery supply chain. This will be an important focus for the next phase of its work. Today’s update identifies 10 indicative product categories (including milk, bread, and baby formula) that merit further analysis to gain a deeper understanding of competition and price dynamics. Our choices are not an indication of any provisional concerns that competition for these products is ineffective.
As part of its ongoing work, the CMA could make recommendations to address any competition issues it finds or take a closer look at any areas which justify further scrutiny.
Unit Pricing
At a time when shoppers are looking for the most competitive deals, unit pricing provides critical information to ensure people can compare prices effectively.
The review looked at 11 supermarkets and 7 variety retailers (stores that sell homeware and household goods with a more limited range of groceries) that operate in the UK .
The CMA has found compliance concerns with the Price Marking Order (PMO) amongst all those it reviewed, however for some retailers these were relatively minor. The CMA has identified that compliance is worse amongst some variety retailers.
Some of the problems stem from the unit pricing rules themselves, which allow unhelpful inconsistencies in retailers’ practices and leave too much scope for interpretation. As a result, shoppers may be finding it hard to spot and compare the best deals.
The CMA’s concerns relate to:
Consistency – different measurements are being used for similar types of products, making it hard for consumers to compare deals on a like-for-like basis. For example, tea bags being priced per 100 grams for some products and others being unit priced per each tea bag.
Transparency – missing or incorrectly calculated unit pricing information both in store and online. For example, 250ml handwash costing £1.19 but unit priced at £476.00 per 100ml and unit pricing information unavailable online until items were selected.
Legibility – unit pricing information being difficult to read, for example text on labels being too small or shelf edge labels being obscured by promotional information or by shop fittings.
Promotions – some retailers not displaying unit prices for any products on promotion.
In its report, the CMA has set out recommendations on the unit pricing rules and is calling on the government to reform this legislation, to help shoppers spot the best deals. The CMA has also written to those that are not fully complying with the PMO and expects them to make changes to address its concerns or risk enforcement action.
More broadly the CMA is calling on all retailers to give consumers the unit pricing information they need to make meaningful comparisons, particularly for products on promotion, even before any reforms to the PMO are introduced.
The CMA will publish the findings of its consumer research into the use of unit pricing in Autumn 2023.
Sarah Cardell, CEO of the CMA said: With so many people struggling to feed their families, it’s vital that we do everything we can to make sure people find the best prices easily.
“We’ve found that not all retailers are displaying prices as clearly as they should , which could be hampering people’s ability to compare product prices. We’re writing to these retailers and warning them to make the necessary changes or risk facing enforcement action . The law itself needs to be tightened here, so we are also calling on the government to bring in reforms.
“We’ve also looked at how competition is working across the grocery retail market more widely. The overall evidence suggests a better picture than in the fuel market, with stronger price competition between all of the supermarkets and discounters. In the next phase of our work, we will examine competition and prices across the supply chain for the product categories we’ve identified.
“We’ll also continue to monitor the situation to ensure that competition remains effective as input costs start to fall.
More information and full reports can be found on our
Retailers will be forced to provide up-to-date price information as part of new government scheme to call out rogue supermarkets and stations overcharging drivers at the pump.
Motorists will be able to easily compare fuel prices in real time to choose the best prices whilst boosting competition and in turn driving down prices.
Government action after watchdog finds some supermarkets charged drivers 6p more per litre for fuel from 2019 to 2022 – meaning £900m in extra costs across the UK in 2022 alone.
Motorists are being put in the driving seat to find the best fuel prices as the government prepares to force retailers to publicly fess up to how much they are charging at the pump.
In a win for consumers, they will be able to compare prices in real time in any area of the UK, through a new fuel price reporting scheme. Drivers will be able to easily identify those charging fair prices and those failing to pass on savings from falling wholesale costs.
The government will change the law to force retailers to comply by providing up to date price information, which is expected to lead to greater transparency and competition – in turn driving down prices and easing people’s cost of living.
The new scheme will make pricing data available for third parties – paving the way for them to create price comparison apps and websites – supporting the digital economy and helping growth.
The tough action by government follows publication of a Competitions and Markets Authority (CMA) report today showing some supermarkets charged drivers 6p more per litre for fuel. This amounts to £900m in extra costs in 2022 alone – around £75m a month.
New powers will be handed to a public organisation yet to be decided, to closely monitor the UK road fuel market, scrutinise prices and alert government if further intervention is needed.
This is the latest step in the government’s action to ease the cost of living, as part of its efforts to halve inflation this year – one of the Prime Minister’s five priorities. It follows the Chancellor’s roundtable with regulators last week, including the CMA, to ensure consumers are being treated fairly and help those struggling to make payments.
Grant Shapps, Energy Security Secretary, said: “Some fuel retailers have been using motorists as cash cows – they jacked up their prices when fuel costs rocketed but failed to pass on savings now costs have fallen.
“It cannot be right that at a time when families are struggling with rising living costs, retailers are prioritising their bottom line, putting upwards pressure on inflation and pocketing hundreds of millions of pounds at the expense of hardworking people.
“Today I’m putting into action the CMA’s recommendations and standing by consumers – we’ll shine a light on rip-off retailers to drive down prices and make sure they’re held to account by putting into law new powers to increase transparency.”
Jeremy Hunt, Chancellor of the Exchequer, said: “It isn’t fair that businesses are refusing to pass on lower prices to protect their profits while working people struggle with balancing their budgets.
“Consumers need to be treated fairly, and so we’re empowering drivers to find the best prices possible for their fuel by taking swift steps following the CMA’s recommendations.”
The CMA’s report found a concerning weakening of competition in the fuel market and an overall increase in retailers’ margins, especially in respect of diesel and with supermarkets the worst offenders (see below).
It also noted a lack of reliable and comprehensive price information available to motorists.
The report recommends the mandatory public disclosure of fuel prices and establishment of a body to monitor the market, which the government has agreed to.
The government will consult on the design of the open data scheme, and market monitoring function this autumn – with changes to the law needed to bring it in. In the interim, the CMA will create a voluntary scheme encouraging fuel retailers to share accurate, up-to-date road fuel prices for publication by August and continue to monitor fuel prices using its existing powers.
The move follows a similar scheme in Germany, which boosted competition amongst fuel retailers. Meanwhile, motorists who shopped around in Queensland, Australia, saved on average $93 per year off the back of a statewide scheme rolled out in the area.
Action to protect consumers announced today follows the government spending nearly £40 billion protecting households and businesses from spiralling energy bills over the colder months – including paying half the typical household bill and saving the average home roughly £1,500 by the end of June.
Meanwhile, with the latest Ofgem price cap coming into effect from 1 July, families will see their yearly energy bills fall by around £430 on average. On top of this, the government is also providing additional support to the most vulnerable, with an extra £150 for disabled people and £900 for those on means-tested benefits.
CMA sets out plan to help drivers get more competitive fuel prices
A new fuel finder scheme to enable drivers access to live, station-by-station fuel prices on their phones or satnavs would help revitalise competition in the retail road fuel market, the CMA said yesterday
Increased supermarket fuel margins led to drivers paying an extra 6 pence per litre
Instant access to prices via fuel finder scheme should drive down prices and help people find cheapest fuel
New monitoring body needed to hold industry to account
Asda fined £60,000 for failure to provide information when required
The scheme would be made possible by new compulsory open data requirements and backed by a new ‘fuel monitor’ oversight body. The proposals are the key recommendations by the Competition and Markets Authority (CMA) to UK government following its in-depth study into the road fuel market which found a weakening of competition in retail since 2019.
At present, retailers only provide information on prices at the petrol stations themselves. This makes it hard for drivers to compare prices and weakens competition. The fuel finder open data scheme would need statutory backing through legislation to ensure fuel retailers provide up-to-date pricing and make that available to drivers in an open and accessible format that can be easily used by third party apps such as satnavs or map apps, through a dedicated fuel finder app, or a combination of both.
The fuel monitor would monitor prices and margins on an ongoing basis and recommend further action if competition continues to weaken in the market. As the UK transitions to net-zero the demand for petrol and diesel will reduce. The fuel monitor will help us understand the impact of this on vulnerable consumers that remain dependent on petrol and diesel for longer, as well as those living in areas with limited choice of fuel stations.
The fuel monitor will ensure ongoing scrutiny of retail prices for petrol and diesel. We observed that following the interim update issued by the CMA in May 2023, the average price of road fuel fell in large parts of the UK. Over the last year, the CMA has investigated the road fuel market in detail and reached the conclusion that competition is not working well and greater transparency in pricing is needed to improve consumer confidence and bring down prices for drivers.
There is no evidence to suggest that there has been cartel behaviour taking place and the CMA has no plans to open an enforcement case.
The report found that:
From 2019-22, average annual supermarket margins have increased by 6 pence per litre (PPL)
Increased margins on diesel across all retailers have cost drivers an extra 13 PPL from January 2023 to the end of May 2023
With greater transparency and shopping around as effectively as possible, the driver of a typical family car could save up to £4.50 a tank within a 5-minute drive
Motorway service stations are charging around 20 PPL more for petrol and 15 PPL more for diesel compared to other fuel stations
Supermarkets are generally the cheapest places to buy fuel, with Asda typically the cheapest of those. This has anchored prices in the past. The CMA found that in 2022, Asda and Morrisons each made the decision to target higher margins.
Asda’s fuel margin target in 2023 was more than three times what it had been for 2019, while Morrisons doubled their margin target in the same period. Other retailers, including Sainsbury’s and Tesco, did not respond in the way you would expect in a competitive market and instead raised their prices in line with these changes. Taken together this indicates that competition has weakened and reinforces the need for action.
Diesel prices have been slow to drop in 2023, partially down to Asda ‘feathering’ (reducing pump prices more slowly as wholesale prices fell) its prices and other firms not responding competitively to that. As a result, the CMA estimates that drivers have paid 13 PPL more for diesel from January 2023 to the end of May 2023 than if margins had been at their historic average.
Sarah Cardell, Chief Executive of the CMA, said: “Competition at the pump is not working as well as it should be and something needs to change swiftly to address this.
“Drivers buying fuel at supermarkets in 2022 have paid around 6 pence per litre more than they would have done otherwise, due to the four major supermarkets increasing their margins. This will have had a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.
“We need to reignite competition among fuel retailers and that means two things. It needs to be easier for drivers to compare up to date prices so retailers have to compete harder for their business.
“This is why we are recommending the UK government legislate for a new fuel finder scheme which would make it compulsory for retailers to make their prices available in real time. This would end the need to drive round and look at the prices displayed on the forecourt and would ideally enable live price data on satnavs and map apps.
“Given the importance of this market to millions of people across the UK this needs to be backed by a new fuel monitor function that will hold the industry to account. As we transition to net zero, the case for ongoing monitoring of this critical market will grow even stronger, so we stand ready to work with the UK government to implement these proposals as quickly as possible.”
Local factors also contribute to how much drivers pay at the pump. The CMA identified that there are significant price differences in local areas, and that the difference between the highest and lowest prices in local areas has increased as average fuel prices have risen.
Lower prices are typically associated with having a supermarket retailer nearby, and where there are no supermarkets, for example, in remote areas, fuel retailers are likely to have higher costs and prices are likely to be higher. The fuel finder scheme will be important to help people find the best deal possible but it is essential that the monitoring function keeps a close eye on local variations in prices.
The price premium at motorway service stations has grown in real terms since 2012, and price variation on motorways is low, due to limited competition between service stations. A fuel finder scheme would allow drivers an easy way to see where they can find cheaper fuel in the area if they come off the motorway.
The CMA has also imposed fines totalling £60,000 on Asda for failing to provide relevant information in a timely manner.
Asda received two fines, each of £30,000 (the statutory maximum), for:
Sending a representative to attend a compulsory CMA interview who was not equipped to provide evidence on certain topics the CMA had identified in advance.
Failing to respond completely to a compulsory written request for information.
Asda has now provided the CMA with the required information.
The CMA also found that “increased margins on diesel across all retailers have cost drivers an extra 13 PPL from January 2023 to the end of May 2023.”
The organisation goes on to say:
“Over the last year, the CMA has investigated the road fuel market in detail and reached the conclusion that competition is not working well and greater transparency in pricing is needed to improve consumer confidence and bring down prices for drivers.”
However, the CMA could find “no evidence to suggest that there has been cartel behaviour taking place and the CMA has no plans to open an enforcement case.”
The CMA’s study on road fuel prices identified a reduction in competition amongst the supermarkets:
“Supermarkets are generally the cheapest places to buy fuel, with Asda typically the cheapest of those. This has anchored prices in the past. The CMA found that in 2022, Asda and Morrisons each made the decision to target higher margins. Asda’s fuel margin target in 2023 was more than three times what it had been for 2019, while Morrisons doubled their margin target in the same period.
“Other retailers, including Sainsbury’s and Tesco, did not respond in the way you would expect in a competitive market and instead raised their prices in line with these changes. Taken together this indicates that competition has weakened and reinforces the need for action.
“Diesel prices have been slow to drop in 2023, partially down to Asda ‘feathering’ (reducing pump prices more slowly as wholesale prices fell) its prices and other firms not responding competitively to that. As a result, the CMA estimates that drivers have paid 13 PPL more for diesel from January 2023 to the end of May 2023 than if margins had been at their historic average.”
The CMA is calling for the compulsory release of price data by fuel retailers so that apps can be developed which allow drivers to check what is the best price in their local area.
It also wants to see a new monitoring body to hold the industry to account.
According to the CMA “motorway service stations are charging around 20 PPL more for petrol and 15 PPL more for diesel compared to other fuel stations.”
The CMA has concluded its independent study into the music streaming market
The Competition and Markets Authority (CMA) has published its final report and found that consumers have benefited from digitisation and competition between music streaming services.
Prices for consumers have fallen by more than 20% in real terms between 2009 and 2021 – with many services also offering music streaming for free with ads.
The study found that there were around 39 million monthly listeners in the UK, streaming 138 billion times a year.
The CMA also heard concerns from creators – artists and songwriters – about how much they earn from streaming. With an increasing number of artists, tracks and streams, the money from streaming is shared more widely – with those that have the highest number of streams earning the most. The CMA found that over 60% of streams were of music recorded by only the top 0.4% of artists.
The CMA found that the concerns raised by artists are not being driven by the level of concentration of the recording market. Analysis found that neither record labels nor streaming services are likely to be making significant excess profits that could be shared with creators.
Consequently, the issues concerning creators would not be addressed by measures intended to improve competition, but instead would need other policy measures in order to be addressed.
Digitisation has led to a major increase in the amount of music people have access to and to large increases in the number of artists releasing music (up from 200,000 in 2014 to 400,000 in 2020) partly by opening up new direct routes to listeners.
This has also meant that there is greater competition to reach listeners and for the associated streaming revenues. The study found that an artist could expect to earn around £12,000 from 12 million streams in the UK in 2021, but less than 1% of artists achieve that level of streams.
Some parts of the streaming market have improved for some creators in recent years, with the CMA finding a greater choice of deals with record labels available. Whilst individual deals can vary considerably, the report highlighted on average royalty rates in major deals with artists have increased steadily from 19.7% in 2012 to 23.3% in 2021. For songwriters, the share of revenues going to publishing rights has increased significantly from 8% in 2008 to 15% in 2021.
While the CMA understands the concerns from creators about the level of income many receive, the analysis in the study suggests it is unlikely that an intervention by the CMA would release additional money into the system to pay creators more.
The study does however highlight that the issues raised by creators could be further considered by government and policymakers as part of their ongoing work following the DCMS Select Committee’s inquiry into the economics of music streaming.
Sarah Cardell, Interim CEO of the CMA, said: “Streaming has transformed how music fans access vast catalogues of music, providing a valuable platform for artists to reach new listeners quickly, and at a price for consumers that has declined in real terms over the years.
“However, we heard from many artists and songwriters across the UK about how they struggle to make a decent living from these services. These are understandable concerns, but our findings show that these are not the result of ineffective competition – and intervention by the CMA would not release more money into the system that would help artists or songwriters.
“While this report marks the end of the CMA’s market study, which addresses the concerns previously posed about competition, we also hope the detailed and evidence-based picture we have been able to build of this relatively new sector will provide a basis that can be used by policymakers to consider whether additional action is needed to help creators.”
