Only the supermarkets know if they are charging fair prices

There has been some rare good news for Irish consumers over the last eight days with the State’s leading retailers virtually falling over themselves in the race to lower the price of two staples.

First up it was milk. At exactly 6pm last Friday Lidl announced it was cutting the price of own-brand milk by about 4 per cent. Within six hours Aldi, Tesco and SuperValu had all confirmed they too were lowering the price of their milk by the same margin.

That they were all able to make this decision out of office hours, at the start of a bank-holiday weekend – SuperValu announced its price cut just before midnight – might be surprising, not least because none of them gave The Irish Times any hint such moves were in the offing when it asked specifically about own-brand milk prices just 24 hours earlier.

Their decision to immediately match Lidl’s move was not remotely at odds with how the Irish supermarket sector works, however.

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Price matching has long been a feature of the Irish supermarket landscape. There is no evidence to suggest that supermarkets collude on prices – which would be against the law – but they all pay very, very close attention to what others are doing and will do whatever it takes to ensure they don’t give rivals a competitive edge.

[ Supermarkets cut cost of butter as dairy price wars heat up  ]

[ Consumer watchdog urged to investigate ‘price gouging’ by supermarkets ]

Fast forward to Wednesday, when it was Tesco’s turn to move. It said it was dropping the price of its 454g packets of own-brand butter by 40 cent to €2.99. Within hours its rivals had followed suit.

The two price cuts will shave about €40 off the annual grocery shopping bill of a typical Irish family, a bill which has climbed by more than €1,000 since the start of the cost-of-living crisis, so – while welcome – it won’t make that much difference to household budgets.

The cuts have, however, turned the volume up on a debate about grocery pricing and if and when consumers can expect the cost of their weekly shop to fall.

Figures released by Kantar earlier this week highlighted a decline – but the 0.2 per cent fall in grocery inflation from 16.8 per cent to 16.6 per cent was so negligible that it almost doesn’t count.

By Wednesday evening Taoiseach Leo Varadkar was telling a private meeting of the Fine Gael parliamentary party that the message to the retail sector was that “grocery prices must come down if their input costs come down”.

He said the Minister of State at the Department of Enterprise, Trade and Employment, Neale Richmond, was bringing forward the next meeting of the Retail Forum from late June until “as soon as possible”.

That may suggest the Government it finally tacking an issue that has been repeatedly highlighted in this newspaper and elsewhere since input costs such as motor fuel and energy started to fall earlier this year. A question mark hangs over what – if anything – the Retail Forum can do other than talk about the issue, however.

It is made up of industry groups including Retail Ireland and the Small Firms Association. Retailers including Tesco, Musgraves – which owns SuperValu – and Primark are also represented. There are multiple civil servants and academics as well.

While it might operate with the best will in the world, independent voices representing consumers are, however, notable by their absence. One source who has had dealings with the forum told The Irish Times that it was little more than a “talking shop”.

[ Government ‘reluctant’ to introduce price controls for food, Taoiseach says ]

[ Milk price wars could damage Irish dairy farmers, IFA warns ]

But the Retail Forum is not the only game in town.

Calls have been made for the Competition and Consumer Protection Commission to investigate supermarket pricing but that too is likely to be a dead end as it is not empowered to act unless it believes there is collusion on pricing and there are few voices suggesting that is the case.

Were the Government so minded it could impose price caps on certain products. Provisions contained within the Consumer Protection Act 2007 allow for price controls in emergency situations.

The Labour Party’s enterprise spokesman, Ged Nash, called for the emergency price cap provisions to be considered, telling this newspaper late last week that we are undoubtedly living through an emergency situation.

He is right, of course, but whether or not consumers would be well served ultimately by the Government getting involved in pricing is very much up for debate.

The elephant in the room is profit. Given the Byzantine nature of the business for decades, it is impossible to know just how much money Irish supermarkets make from Irish shoppers.

The only ones who know if the prices supermarkets are charging are fair or otherwise are the supermarkets themselves. Maybe if we got some answers on that score we’d find ourselves in a different place.