Tesco Hit With Claims Its Price Comparisons Are Bogus

U.K. grocery giant Tesco is under fire again for its price comparisons. Last week, the CEO of Morrisons, the U.K.'s fourth-largest grocer, said his company was negotiating with Tesco over an at-the-register price comparison program that he said was unfair, according to the Financial Times.

"We find it challenging when a third of the basket is not successfully compared," said Morrisons CEO Dalton Philips, adding that if talks break down, Morrisons will file a formal complaint with the U.K.'s Advertising Standards Authority, which has the power to force changes in marketing programs. Another Tesco competitor, third-ranked grocer Sainsbury's, has already filed a complaint with the ASA.

The fight is over a Tesco program that compares its prices for both branded and private-label products with those of its competitors. Tesco argues that the comparisons are incomplete but still fair. "We only compare products where our competitors sell a product that matches ours," a Tesco spokesperson said. "One of the reasons comparisons can't always be made is that we generally have a bigger range than other U.K. supermarkets, which will mean they will often not have products that match ours."

Price comparisons seem like a great idea—what could be better for customers than doing their comparison shopping for them?—but this may be hopeless for everyone involved. There's no question that Tesco's comparisons are incomplete if the chain leaves out one-third of the items in a shopping cart—and that's assuming Tesco can actually maintain an accurate, up-to-date database of its competitors' prices. Cherry-picking items in the name of apples-to-apples comparisons sounds unfair on the face of it. On the other hand, comparing closeouts or packages that aren't the same size gets really subjective, even though that's something customers have to do every day.

Why doesn't Tesco forget price comparisons and just do a straight price-match promotion? Probably because it's been a catastrophe for its largest competitor, Asda, which is owned by Walmart (NYSE:WMT). Last September, Asda gave up on a promotion in which it promised to beat competitors' prices by 10 percent or refund the difference. But so-called "professional shoppers" were gaming the promotion to get as much as $14,000 in refunds in a month by using deeply discounted closeouts as the competing prices.

For more:

- See this Financial Times story
- See this RetailWeek story

Related stories:

Tesco Confirms Its U.S. Pullout, Fate Of Fresh & Easy Unclear
Tesco Surrendering On Much Of Its Non-Food Strategy
Can Price-Match Deals Work? Not Any More