Loyalty Pays: CMA Confirms Genuine Savings for Supermarket Loyalty Scheme Members and Issues New Guidance on Consumer Law Compliance

On 27 November 2024, the UK’s Competition and Markets Authority (CMA) released a report, unveiling the findings from its deep-dive into loyalty pricing in the groceries sector. In what is good news for the supermarkets, the CMA found that loyalty pricing offered genuine savings for consumers relative to the equivalent non-loyalty pricing.

Background

In November 2023, the CMA announced a review of loyalty pricing by supermarkets to tackle cost of living pressures in the groceries sector. It focused on whether loyalty pricing is misleading, disadvantages certain shoppers, or impacts consumer behaviour and supermarket competition. The review began in January 2024.

In July 2024, the CMA provided an update which outlined that while there was little evidence of misleading promotions, there were concerns about the authenticity of savings claims in 'was/now' promotions. The CMA conducted a consumer survey and compared loyalty prices between supermarkets to assess the impact of loyalty pricing on shopping behaviour, trust in savings, loyalty scheme engagement, and data use concerns. This review was concluded last month, with the issuance of the CMA’s findings and further guidance for retailers. 

What’s the deal with loyalty pricing?

As a part of its investigation, over the course of a year the CMA examined the prices of nearly 50,000 products included in loyalty promotions across five supermarkets, namely Sainsbury’s, Tesco, Morrisons, Co-op, and Waitrose.[1] The prices were compared to that of the same branded products in six other supermarkets to assess whether the loyalty pricing provided a legitimate discount. 

Some of the key findings of the report included the following:

• Real savings: Shoppers with loyalty scheme membership can generally save money on loyalty priced products.
• No fake markups: Supermarkets are not inflating regular prices to exaggerate deals.
• Shop around: Loyalty prices may not always beat the cheapest prices at other supermarkets.
• Accessibility gaps: Supermarkets should consider whether their schemes are accessible to those under 18, and those without smartphones.

The findings were clear; loyalty prices generally offer real savings. A significant majority (92%) of loyalty-priced products analysed provided discounts, with average savings ranging from 17%-25%. 

A significant concern for the CMA, as well as consumers, was whether supermarkets were artificially inflating the regular prices of products to deceive customers into thinking they were receiving a better deal. This concern was reflected in the CMA's survey, which found that 55% of shoppers believed that prices for non-loyalty members were inflated during promotions. However, the CMA discovered little evidence of inflated prices by analysing the prices of products before, during, and after they were included in loyalty promotions. Despite this finding, the report cautioned that prices offered on loyalty promotions may not always be the cheapest available in the market.

The CMA's review also included an examination of supermarkets' data collection and usage practices for loyalty schemes, with no evidence of consumer law concerns found. The CMA found that supermarkets provide sufficient information to shoppers about their data usage, including types of data collected and how it's used.

Recommendations

To supplement the generally positive news for consumers and supermarket alike, the CMA issued guidance to ensure loyalty membership schemes are accessible to all and stay on the right side of the law. 

Recommendations made include the following:

• Avoid misleading back-to-back promotions.
• Sell items at a genuine price for a reasonable time (making a significant number of sales) immediately before the loyalty price promotion.
• When making a price comparison, the promotion is more likely to comply with the law where it is for a period that is the same or shorter than the period during which the higher price was offered.
• Review practices to consider whether loyalty schemes are accessible to all shoppers, with a particular focus on those under 18 and without smartphones.

Chapter 6 of the CMA’s report sets out some helpful guidance and illustrative examples for supermarkets to consider when running or planning their loyalty pricing promotions. Although the principles contained in current consumer law associated guidance (such as the CTSI Guidance for businesses on pricing practices) cover other types of promotions, the CMA understands that loyalty prices are a relatively new type of promotion and as such, the current guidance does not explicitly consider them.

The review also highlighted areas for improvement in terms of accessibility to loyalty schemes. Specifically, certain groups, such as those without smartphones or under 18 years old, may have difficulty accessing and understanding loyalty prices. The CMA suggests solutions such as implementing offline sign-up options and lowering the minimum age for joining a scheme.

Conclusion

With 27% of shoppers surveyed having joined a loyalty scheme in the past year, this CMA investigation emphasises the role of loyalty pricing in shaping the grocery shopping experience. With clear evidence that most schemes offer real savings, they remain a valuable tool for consumers.

For supermarkets, the report underscores the need to prioritize transparency, fairness, and accessibility. By refining loyalty schemes to make them more inclusive, grocery retailers can not only stay compliant with consumer law but also strengthen trust and loyalty among their customers—a win-win for all.

For more information, please contact Dr Saskia King, Robert Turner, Amy Cole or Flora McCarthy.

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[1] While Iceland, Marks & Spencer, Ocado and Asda have loyalty schemes, they do not offer loyalty pricing.