Sainsbury’s-Asda merger would be “extremely detrimental”, says supplier

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Sainsbury's-Asda supplier

Sainsbury’s proposed £12 billion merger with Big 4 rival Asda would be “extremely detrimental” to shoppers, an unidentified supplier to the grocers has argued.

The major supplier, named as “supplier B” by the CMA, made the argument as part of an inquiry being carried out by the UK’s peak competition regulator.

In its letter published yesterday, the supplier wrote: “The proposed merger will create the largest grocery retailer in the UK, ahead of Tesco and together the parties and Tesco will benefit from a duopoly with estimated segment shares of 80 per cent of the major multiple segment, 60 per cent of the total grocery segment and 70 per cent of the online grocery segment.

“This will have significant negative implications and raise material competition issues at all levels of the supply and distribution chain, which ultimately will be will be extremely detrimental for consumer welfare.

“The damaging effects of the proposed merger will be long lasting and unlikely to be counterbalanced by any market developments (such as expansion of existing actors or new entry) or regulatory frameworks (such as the Groceries Supply Code of Practice or existing competition law legislation).

“Unlike previous retail mergers, the proposed merger will cause a fundamental change to the structure of the grocery sector to the detriment of consumers.”

Supplier B also argued that German discount grocers Aldi and Lidl would not “exert any direct meaningful competitive constraint on the parties” and any store disposals ordered if the deal goes ahead would not “resolve the issue of lack of direct alternatives to the parties”.

The CMA also published a 76-page submission from Sainsbury’s and Asda responding to the issues statement the CMA published last month.

Their key argument was that the deal would lower prices and improve customer offerings, while allowing suppliers to grow their businesses.

The two grocers also believe the CMA would not insist on a level of store disposals that will make the deal unpalatable.

The news comes after another Big 4 rival Morrisons expressed concerns over the proposed merger’s impact on national and local grocery competition, while Waitrose highlighted concerns over the creation of a duopoly.

The CMA is continuing to seek views from interested parties, and will publish submissions as it receives them, as it carries out its probe on the proposed Sainsbury’s-Asda merger.

The competition regulator is slated to reveal provisional findings on the proposal early next year.

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