Consumer watchdog says no Irish research planned as UK regulator finds brands hiked prices to maximise profits

The State’s consumer watchdog has no plans to carry out an investigation into the pricing of branded products on supermarket shelves despite its counterpart in the UK releasing a report suggesting suppliers there have contributed to food inflation by pushing up prices by more than their costs.

The UK’s Competition and Markets Authority (CMA) said an inquiry into the food and groceries sector, launched in July, had found that record food inflation had been driven largely by rising input costs.

But it noted that up to three-quarters of branded goods makers, notably baby formula makers, had increased their profitability and contributed to higher food price growth.

As in the Republic, food and grocery prices in the UK soared in the first part of this year with inflation across the sector hitting 19.2 per cent last March, just under three percentage points more than the highest rate recorded by the Central Statistics Office.

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The CMA opened its inquiry into attempts by grocery retailers to build back their profit margins as inflation fell after it noted signs of profiteering.

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Its review looked at 10 different branded products — including infant formula, baked beans, mayonnaise and pet food — and concluded that competition was not under threat as consumers could for the most part find cheaper alternatives.

Except in the case of baby formula, the CMA said consumers had often traded down from branded goods to supermarket own-label products, or reduced consumption entirely.

It said it would “examine further” whether parents were paying too much for infant formula as a result of weak competition.

The infant formula industry is dominated by consumer goods groups Danone and Nestlé, which together hold roughly 85 per cent market share in the UK.

CMA chief executive Sarah Caddell noted how food price inflation had “put a huge strain on household budgets, so it is vital competition issues aren’t adding to the problem”. She said the regulator was “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”.

The Competition and Consumer Protection Commission (CCPC) carried out “a rapid and high-level analysis of the grocery sector in Ireland using publicly available data” in June this year following a request from the Minister for Enterprise Simon Coveney.

In response to queries from The Irish Times on Wednesday, it said the purpose of that analysis “was to outline the CCPC’s observations on competition in the grocery retail sector in Ireland”.

A spokeswoman said it did not investigate any individual retailers or brands.

“Profitability in the supermarket sector can vary depending on multiple factors such as competition, operational efficiency, and pricing strategies,” said the authority. “Generally, traders in Ireland are free to set and change their prices for goods and services and charging high prices is not, of itself, generally a breach of competition or consumer protection law. In a competitive market, traders who attempt to significantly increase their profit margin through price increases are likely to lose market share because consumers will switch to competitors.”

The statement added that it was “aware that the grocery sector is a critical one and price increases have caused real stress for consumers. In this context, we continue to promote competition and protect consumer welfare through our merger review powers to ensure that potentially anti-competitive mergers in the grocery sector are effectively remedied. Transparency of price also plays an important role in groceries and the CCPC continues to actively inspect and enforce consumer protection law in relation to price display and welcomes recent regulations around price indications.” —Additional reporting: Copyright The Financial Times 2023