Sainsbury’s £12 billion merger with Asda could result in higher prices and reduced choice for consumers, according to a published summary of responses.
The responses to the tie-up, which took in the views of rival supermarkets, wholesalers, suppliers and members of the public – were revealed by the Competition and Markets Authority (CMA) yesterday.
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It forms part of the competition watchdog’s investigation on the potential mega-merger.
“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,” the CMA said.
“Some respondents suggested that this could give rise to higher prices, reduced choice, or a loss of innovation within the supply of groceries.”
The merger of the country’s second and third largest supermarkets would topple Tesco’s longstanding reign as the UK’s biggest grocer my market share.
Sainsbury’s-Asda’s revenues would also be £51 billion thanks to network of 2800 Sainsbury’s, Asda, Habitat, Argos and George stores.
When it was first announced at the end of April, Mike Coupe said the merger would lead to £500 million in cost savings and further investment to lower prices by around 10 per cent on everyday items.
The CMA recently confirmed that it was looking into the proposed deal and was in the “pre-notification” phase, which means it was in the midst of gathering information before a formal inquiry could be launched.
Fears have also been expressed that suppliers could get squeezed as a result, with the tie-up giving the merged entity increased buying power.
“Some respondents raised concerns that the proposed merger would provide the combined company with increased buyer power, which they said 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 summary of responses read.
It also said that some suppliers could also be forced out of business.
Sainsbury’s and Asda have said only large suppliers would experience any pain.
The news comes as Sainsbury’s chief executive Mike Coupe and Asda chief executive Roger Burnley prepare to appear before the Environment, Food and Rural Affairs (EFRA) Committee tomorrow.
It’s expected that they will be grilled on the deal, with questions evolving around the proposed merger’s impact on farmers, suppliers and consumers.
Sainsbury’s said in a statement: “We are working closely with the CMA and look forward to making our case when the formal review begins.
“The combined business would aim to reduce prices on everyday items by around 10 per cent, lowering the cost of living for millions of UK households.”
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