Price matching or price collusion? How UK supermarkets keep prices high 

Price match guarantees are, on the surface, a win for consumers, but behind the veil of advertising, they are merely a technique to enable collusion between firms.   

Aldi has won Which?’s cheapest supermarket every month for the last two years, except once. The relatively low prices at Aldi and the stagnation of real wages during a cost-of-living crisis have been a recipe for its success. Aldi is now the fourth-largest supermarket chain, with a 10.1% market share, and is increasingly likely to surpass Asda.  

Therefore, it is no surprise that with such a strong market entrant, more established firms are fighting to keep their market share. One strategy is price matching, which erodes Aldi’s price advantage. In October 2025, Sainsbury’s had nearly 900 Aldi price matches while Tesco had over 760.

Price match guarantees offer numerous benefits, such as enhancing brand image and encouraging loyal behaviour, but their main benefit is stabilising prices through tacit collusion. By this, I argue that price-matching guarantees remove Aldi’s incentive to lower prices.

Tesco has proved to Aldi that, no matter what, they will follow their price movements on their price-matched goods. If Aldi decreases their price by 10%, Tesco will follow and decrease its price by 10%. A key purpose of lower prices is to drive more demand and take market share from other firms that keep prices higher. If Tesco copies Aldi, Aldi has less incentive to cut prices, because its profit margin will fall for no benefit.  

The significant inflation we have experienced in food has not reversed; prices have stayed high, with everyday people feeling the pinch.  

Meanwhile, Aldi is incentivised to raise prices because its competitors will follow suit. If they increase prices, they will not lose market share but instead grow their profit margins further. I have seen this first-hand: every time Aldi increases its prices, be it on strawberries or frozen pizza, Tesco quickly follows suit. Aldi is essentially acting as a price leader for essentials and is incentivised to raise its prices.  

In the five years to July 2025, food prices rose by approximately 37% on average, significantly higher than the 4.4% increase in the previous five-year period. There have been a range of reasons for the price rises, including climate change, the war in Ukraine, and generally rising business costs. However, climate events like drought are not permanent, and the shocks felt from Ukraine should have passed. And yet, the significant inflation we have experienced in food has not reversed; prices have stayed high, with everyday people feeling the pinch.

While there are many reasons for this, price-match guarantees play a part in the sustained increase. Firms have been able to increase prices, using events like Ukraine as an excuse, and then never return to their original prices, as there is less incentive to compete by lowering prices. Tesco’s operating profit margin increased from 3.1% to 4.5%; meanwhile, its operating profit also increased from nearly £1.7 billion to £3.2 billion. To put this into perspective, Tesco’s revenue has increased by 21%, while its operating profit increased by 75%. In a time of rising business costs, such a large increase in operating profit warrants scrutiny.  

Whilst there are occasional bouts of competition, notably price wars over vegetables, the price-matching introduced serves to tacitly collude and disincentivise these wars. It is in customers’ best interests for these oligopoly firms to fight over prices, but with the threat of price matching, price undercutting is a suicidal decision with no upside.