Drivers pay £1.6bn too much in weak petrol market - CMA

26th Jul 2024 07:16

(Sharecast News) - The Competition and Markets Authority (CMA) reported on Friday that weakened competition among fuel retailers had led to UK drivers paying over £1.6bn more than they should have in 2023.

According to the regulator's latest analysis on the cost of living crisis, retail fuel margins had significantly increased, especially at supermarkets, where margins had doubled since 2019.

In its third interim monitoring update, the CMA emphasised that the elevated margins indicated ongoing failures in market competition, mirroring the situation detailed in its July 2022 road fuel market study.

It previously suggested the implementation of a smart data-driven fuel finder scheme to provide real-time price comparisons via map apps and sat-navs, potentially saving drivers up to £4.50 per fill-up.

Despite some progress, with major retailers beginning to share price data, the current scheme only covered 40% of fuel retail sites, limiting its effectiveness.

The CMA said it supported the introduction of the Digital Information and Smart Data Bill, which could establish a mandatory, comprehensive fuel price data-sharing scheme.

Meanwhile, the regulator said it was urging the government to introduce a robust interim voluntary scheme to offer consumers quicker access to fuel price information.

The CMA also updated its findings on the groceries sector, indicating stronger competition and more effective measures to control retail margins.

Its July 2023 review found no widespread evidence of weak competition, with low profit margins and consumers actively seeking the best deals.

Recent analysis showed a slight increase in grocery retailer revenues, profits, and margins in the 2024-2024 financial year, as inflation eased.

However, with an average operating margin of less than 3%, the CMA said it did not foresee significant competition concerns.

Additionally, the CMA said it was addressing pricing transparency, noting inconsistencies in unit pricing practices that could confuse shoppers.

Recommendations for legislative changes to the Price Marking Order 2004 were aiming to enhance clarity.

The CMA also reassured consumers that ongoing analysis of loyalty schemes suggested minimal misleading promotions, with further results expected in November.

Finally, the CMA said it had launched a market study into infant formula pricing, which had surged by over 25% from 2021 to 2023.

Early findings suggested that the regulatory framework, supplier behaviours and consumer needs could be driving up costs unnecessarily.

The regulator said it was planning to release an interim report in October with detailed concerns and recommendations.

"At a time when household budgets are under huge strain, it's our job to make sure people can be confident they are getting good deals and that they are not being harmed by weak competition or unfair sales practices," said the CMA's chief executive officer Sarah Cardell.

"Despite inflation falling to 2%, many people are still struggling to pay for everyday items - whether it's filling up at the pump, buying groceries, feeding babies, treating ill pets, or having somewhere to live.

"Last year we found that competition in the road fuel market was failing consumers, and published proposals that would revitalise competition amongst fuel retailers."

Cardell said one year on, drivers were still paying too much.

"We want to work with government to put in place our recommendation of a real-time fuel finder scheme to kick-start competition among retailers.

"This will put the power in the hands of drivers who can compare fuel prices wherever they are, sparking greater competition."

Reporting by Josh White for Sharecast.com.