Asda’s profit margins on fuel have tripled since before the pandemic, according to the competition regulator during a moody parliamentary hearing where the supermarket chain’s co-owner repeatedly refused to explain his pricing strategy.
Mohsin Issa refused to answer several questions about whether Asda had increased fuel profit margins since taking over in 2021, prompting lawmakers on the business select committee to grow increasingly furious as the retailer insisted it had not changed its strategy.
The Competition and Markets Authority (CMA) published a report this month indicating that drivers were paying more for petrol and diesel than before the Covid pandemic due to “weakened” competition.
The CMA told the committee there had been a “significant shift” in the supermarket’s pricing approach following its £6.8billion takeover by billionaire brothers Issa and their private equity partner in 2021. Asda is now set to buy the UK arm of Issas’ EG Group oil fork business for £2.27billion, tightening its grip on the pump.
Gasoline has become a lightning rod for worries about the rising cost of living, as soaring inflation on food, energy and other basic necessities has weighed on household budgets.
Supermarkets are in the spotlight, with the CMA also set to report whether they’ve taken in extra profits on groceries – so-called ‘greed’.
Jonathan Gullis, a committee MP, said on Wednesday that “people were being ripped off at the pumps” at a time when the cost of living was “already straining the supermarket checkout”. He said it was only when the competition watchdog effectively ‘named and humiliated’ what was happening that ‘suddenly the supermarkets magically managed to find a way to cut their costs by 6p per litre’.
Darren Jones, the chairman of the committee, said he was told by a whistleblower that under Asda’s former owner Walmart the retailer aimed to be at least 1p per liter cheaper than its nearest rival, but the new owners had reduced that target to just 0.1p.
In hesitant words, a low-voiced Issa declined to confirm whether that was the case, saying many things went into fuel pricing decisions.
He insisted the group had not changed strategy, saying Asda was “proud to be a price leader” and, while he declined to say directly whether new management had increased profit margins on fuel, he suggested the group had, saying “we invested that margin in food”.
“We don’t see this as a fuel business per se. We see this as a holistic business,” he said. The retailer’s overall profit margins fell from 2.7% to 1.7% under his ownership, Issa said.
He insisted he was ‘absolutely in touch with where customers come from’ having grown up in a ‘two-up, two-down’ and said Asda had invested in keeping food prices low and in its loyalty scheme.
Before Issa testified, Dan Turnbull, the CMA’s director, told the committee that the chain had stuck to its price leadership strategy but changed course on two other aspects – increasing profit margins and deliberately lowering prices – or taking longer to respond to wholesale fuel price declines. He said this was particularly the case for diesel where there had been a lot of price volatility.
“We found that between 2021 and 2023 they had significantly increased their internal fuel margin targets in pence per litre, and indeed in 2023 those pence per liter targets were three times what they were in 2019,” he said.
The competition regulator said it expects the government to pass new legislation to ensure fuel retailers provide up-to-date price data to a planned comparison service.
On Monday, Energy Secretary Grant Shapps appeared to backtrack on bills requiring supermarkets to make fuel prices more transparent, backing a voluntary price system instead.