The two largest UK retail chains are embroiled in scandal amid allegations of uncompetitive behaviour.

Sainsbury's and Tesco an 'understanding' over prices according to a whistleblower who wishes to remain anonymous.

A former director of Sainsbury's, the person claimed that the two supermarkets monitored a set of everyday products that would entice consumers to shop elsewhere if prices varied.

The testimony has cast doubt over government studies that concluded that the multiples were not operating under cartel conditions.

Tesco and Sainsbury's charge exactly the same price for milk, Heinz baked beans, Kellog's cornflakes as well as the most popular brands of washing powder, coffee, sugar, crisps and pet food.

And so-called price wars, like that launched by Tesco this week, do not include any of the items on the list and are of limited benefit to the consumer.

The whistleblower told the Sunday Times: 'This is a very sensitive issue but you basically don't want to get into a price war on the big sellers, the key lines.' He provided a list of essential items that sold at the same ticket in both supermarkets.

He told the Sunday Times: 'This is no coincidence.' As expected, both chains denied they were acting as an oligopoly - similar to a monopoly but where a few, rather than one firm is involved.

A spokesman for Sainsbury's told the Sunday Times: 'There is no agreement with Tesco, either through manufacturers or directly. We are fiercely competitive about our prices and guarantee to have the cheapest in the area.' A Tesco boss added: 'This is a competitive market. We are monitoring prices all the time and always try to keep one step ahead of the game.' Experts said the stores competed on more than price with one aiming to offer more 'downmarket' products such as tinned and frozen goods when their rivals in an area concentrated on 'middle income' product such as fresh fruit and vegetables.

Another authority on the subject said retail merchandisers used ingenious tactics to boost profits, claiming that the right store layout could tempt people into buying the more lucrative lines and double profits.

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