Proposed deal between Sainsbury’s/Asda in danger
It has been found by the Competition and Markets Authority (CMA) that if retailers Sainsbury’s and Asda continue with merge plans, shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK.
The CMA believes the merge could lead to lessening of competition at both a national and local level.
The combined impact means that people could lose out right across the UK and that the deal could also cost shoppers through reduced competition in particular areas where Sainsbury’s and Asda stores overlap.
The CMA has provisional concerns that the merger could also lead to a substantial lessening of competition at both a national and local level.
Stuart McIntosh, chair of the independent inquiry group carrying out the investigation, said: “These are 2 of the biggest supermarkets in the UK, with millions of people purchasing their products and services every day.
“We have provisionally found that, should the two merge, shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK. We also have concerns that prices could rise at a large number of their petrol stations.
“It’s our responsibility to carry out a thorough assessment of the deal to make sure that the sector remains competitive and shoppers don’t lose out.”
Commenting on the CMA’s provisional findings, a spokesperson for Sainsbury’s and Asda said: “These findings fundamentally misunderstand how people shop in the UK today and the intensity of competition in the grocery market.
“The CMA has moved the goalposts and its analysis is inconsistent with comparable cases.
“Combining Sainsbury’s and Asda would create significant cost savings, which would allow us to lower prices. Despite the savings being independently reviewed by two separate industry specialists, the CMA has chosen to discount them as benefits.
“We are surprised that the CMA would choose to reject the opportunity to put money directly into customers’ pockets, particularly at this time of economic uncertainty.
“We will be working to understand the rationale behind these findings and will continue to press our case in the coming weeks.”
The CMA has set out potential options for addressing its provisional concerns.
These include blocking the deal or requiring the merging companies to sell off a significant number of stores and other assets – potentially including one of the Sainsbury’s or Asda brands – to recreate the competitive rivalry lost through the merger.
John Perry, managing director at supply chain and logistics consultancy SCALA, who explains why rejecting the merger means ultimately rejecting the opportunity to improve efficiencies in British businesses says: “The big four have been losing market share to the discounters for some time now, and on top of this have the added pressure of global retail giant Amazon entering the grocery sector, yet the CMA is questioning the proposed Sainsburys/Asda merger on the grounds of ‘anti-competitiveness.’
“This seems rather unfair considering competition in today’s constantly-changing grocery sector is already rife and this would not change if the merger were to go ahead.”
The CMA’s current view is that it is likely to be difficult for the companies to address the concerns it has identified.
The final report from CMA will be issued by 30th April 2019.
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