Blog: Andy CoyneAsda and Sainsbury's - deal or no deal?

Andy Coyne | 18 June 2018

The proposed merger between Asda and Sainsbury's - two of the UK's 'big four' supermarkets - is, as expected, getting people hot under the collar.

Britain's Competition and Markets Authority (CMA) has published the responses from its 'invitation to comment' and, it is fair to say that many of those responses have been critical of what the merger might mean.

The CMA said it received submissions from a wide variety of parties, including other
supermarket groups, wholesalers, suppliers, trade associations, not-for-profit
organisations with an interest in the groceries sector, local government
representatives and members of the public.

It will now consider those views - and submitted evidence - and take these into account as its investigation develops.

The CMA reports that a number of submissions raised concerns about the impact of the proposed merger at the national level, on the belief that it would lead to increased
concentration in the market and fewer national players, with two companies - Tesco and the combined Sainsbury’s/Asda - holding high market shares.

Some respondents suggested that this could give rise to higher prices, reduced choice, or a loss of innovation within the supply of groceries.

Other respondents raised concerns about the impact of the proposed merger on competition at the local level (and, in some cases, within specific local areas in which the parties’ stores overlap).

Some submissions raised concerns that a merger would give rise to a greater risk of tacit co-ordination (ie an implicit understanding between competing firms when they recognise that they are mutually interdependent and can reach a more profitable outcome if they coordinate to limit their rivalry) within the supply of groceries.

And some submissions raised concerns about the impact of the proposed merger
on suppliers and the potential knock-on effects that this could have for
consumers.

There was a concern that a merger would provide the combined company with increased buyer power, which, the respondents fear, would allow it to negotiate lower prices with suppliers and/or to pass on excessive risks and unexpected or disproportionate costs to suppliers.

The CMA's investigation clearly has some way to run and attention will now move to the House of Commons when on Wednesday (20 June) Asda CEO Roger Burnely and his Sainsbury's counterpart Mike Coupe will appear before an environment, food and rural affairs committee to discuss the proposed merger and its likely impact on the retail sector.



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