Sainsbury’s and Asda offer post-merger pledges

By Aidan Fortune contact

- Last updated on GMT

Sainsbury's is pledging to pay small suppliers within 14 days if its merger with Asda is approved by the CMA
Sainsbury's is pledging to pay small suppliers within 14 days if its merger with Asda is approved by the CMA
Sainsbury’s has pledged to pay small suppliers within 14 days if its proposed merger with Asda is given the green light.

The merger, first announced in April 2018, was dealt a serious blow by a Competition and Markets Authority (CMA) investigation​,​ which believed a partnership could “lead to a worse experience for in-store and online shoppers”,​ with prices potentially rising and consumer choice being reduced. Many analysts felt this was the end of the proposed merger.

However, a joint statement from the two retailers has outlined how they strongly disagreed with the CMA’s Provisional Findings and found the CMA’s analysis of the proposed merger to “contain significant errors”​. It also outlined some commitments should the merger be approved, including Sainsbury’s introducing payment to small suppliers within 14 days, in line with Asda’s current practice.

Other pledges included price commitments being independently reviewed by a third party, to deliver £1bn of lower prices annually by the third year of the merger and the capping of Sainsbury’s fuel gross profit margin to no more than 3.5p per litre for five years.

They also outlined supermarket and petrol forecourt divestments across both businesses to “help satisfy reasonable concerns regarding any substantial lessening of competition”​.

In the statement, Sainsbury’s chief executive Mike Coupe and Asda chief executive Roger Burnley said: “We are trying to bring our businesses together so that we can help millions of customers make significant savings on their shopping and their fuel costs, two of their biggest regular outgoings.

“We are committing to reducing prices by £1 billion per year by the third year which would reduce prices by around 10% on everyday items. We are happy to be held to account for delivering on this commitment and to have our performance independently reviewed and to publish this annually.

“We hope that the CMA will properly take account of the evidence we have presented and correct its errors. We have proposed a reasonable, yet conservative remedy package and hope the CMA considers this so that we can deliver the cost savings for customers.”

Supplier disappointment

Following the CMA’s initial report in February, Neil Parish chair of the Environment, Food & Rural Affairs (EFRA) Committee, expressed disappointment at the lack of focus on the impact on suppliers. “While I commend the CMA’s thorough investigation into the merger, I am disappointed that the report was unable to reflect the impact this merger could have on businesses in the food supply chain, other than how it would affect competition at a customer level.

“We sent a letter to the CMA last year, asking them to consider supplier views. We know that businesses working in the food industry already face intense pressure due the uncertainty of Brexit and planning for a no-deal scenario. The EFRA Committee will be watching the next steps of this investigation closely.”

The CMA is expected to publish Sainsbury’s and Asda’s responses to the Provisional Findings and Notice of Possible Remedies in due course, with a final report expected by 30 April.

Related topics: Supply Chain

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