This coming Friday is the deadline for comments from interested parties in the proposed Sainsbury’s and Asda merger, which has the potential to create UK’s largest retail chain and rival market leader Tesco.
The Competition and Markets Authority (CMA) is asking for views on the impact the merger could have on competition in the UK market. It is planning to use a fast-track procedure for the case that could see it move onto the more phase two investigation within around 15 days of its August 23 launch.
A deadline on August 31 has been set for a second round of comments on the merger. In the first preliminary round, points raised included concerns about potential store closures and the effect they might have on local communities, as well as concerns about pricing and a squeeze on those supplying the two supermarkets as they gain increased buying power. Harlow MP Robert Halfon has raised the importance of protecting jobs at the two supermarkets, from logistics and home delivery workers to supermarket staff both in the near future and in the long term.
The GMB union welcomed news that the CMA investigation would take place. National officer Gary Carter said: “It is only right a deal this size – with all the implications for consumer choice, jobs and the high steet – is subject to proper and very detailed scrutiny. Between them, ASDA and Sainsbury’s employ 330,000 people in the UK with combined profits of over £1.4 billion. The ramifications of the proposed merger not only affect choice, but the economic and social wellbeing of families and their communities.
“Asda and Sainsbury’s say they intend to keep the current brands, run the supermarkets separately and that there will be no store closures. We hope the CMA will put this to the test.
“The CMA is under no legal obligation to scrutinise the impact on jobs, but GMB strongly believes there is a moral obligation on them to seek assurances in that regard. Especially considering the size of the workforce, and the effect closure of stores, distribution centres and head offices would have on employees, local communities and the high street.
“The high street and retail sector cannot keep on absorbing the job cuts and closures which are taking place every week.”
Jonathan Branton, head of EU and competition at law firm DWF, said the merger investigation was not a surprise. “The CMA will now look into the likely impact of the merger on the industry,” he said. “Due to the potential for the newly merged entity to have significantly more buying power, suppliers to Sainsbury’s and Asda will certainly raise concerns that there will be too much market power concentrated in common control. For the merger to proceed, it will be important for the CMA to be persuaded (for the sake of suppliers) that the deal will not lead to undue buying power. Sainsbury’s and Asda will no doubt point to the many changes to the marketplace in recent years plus the advent and progress of the discounters in order to create more choice, for suppliers and customers alike.
“Another key concern for the CMA will be that customers could be left with insufficient choice in some locations where the merging parties are the primary if not only options for day-to-day groceries. Sainsbury’s and Asda will surely already have identified the geographical locations in which the CMA may be most likely to consider there to be insufficient choice in the event of a merger and may consider volunteering the sale of some of these stores.”
Sainsbury’s and Asda are both Leading retailers in IRUK Top500 research.