Asda’s profit margins on fuel have tripled since before the pandemic, according to the competition regulator at a bad-tempered parliamentary hearing where the supermarket chain’s co-owner repeatedly refused to explain its pricing strategy.
Mohsin Issa declined to answer multiple questions on whether Asda had increased its profit margins on fuel since its takeover in 2021, prompting MPs on the business select committee to become increasingly furious as the retailer insisted it had not changed its strategy.
Petrol has become a lightning rod for concerns about the rising cost of living as soaring inflation on food, energy and other everyday essentials has squeezed household budgets.
Supermarkets are under the spotlight with the CMA also set to report on whether they have been banking additional profits on groceries - so called 'greedflation'.
Jonathan Gullis, an MP on the committee, said on Wednesday that “people were being ripped off at the pump” at a time when the cost of living was “already forcing a squeeze at the till from supermarkets”. He said that only when the competition watchdog effectively “named and shamed” what was happening that “suddenly supermarkets magically managed to find a way to take 6p per litre off their costs”.
The Competition and Markets Authority (CMA) published a report this month saying drivers were paying more for petrol and diesel than before the Covid pandemic because of “weakened” competition.
The CMA told the committee there had been a “significant change” in the supermarket’s pricing approach after its £6.8 billion takeover by the billionaire Issa brothers and their private equity partner in 2021. Asda is now set to buy the UK arm of the Issas’ EG Group petrol forecourts business for £2.27bn, tightening its grip at the pump.
Darren Jones, the chairman of the committee, said a whistleblower had told him that under Asda’s former owner Walmart, the retailer had aimed to be at least 1p per litre cheaper than its nearest rival but the new owners had reduced that target to just 0.1p.
In faltering words, a quietly-spoken Issa refused to confirm whether that was the case, saying there were many elements that contributed to decisions on fuel pricing.
Before Issa gave evidence, Dan Turnbull, the director of the CMA, told the committee that the chain had stuck with its strategy of being price leader but had altered course on two other aspects – increasing profit margins and to “deliberately feather” prices – or to take more time to react to drops in the wholesale price of fuel. He said this was particularly the case on diesel where there had been a lot of volatility in prices.
“We found that between 2021 and 2023 they significantly increased their internal fuel margin targets on a pence per litre basis, and indeed by 2023 those pence per litre targets were three times what they’d been in 2019,” he said.
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