Sainsbury's £12bn merger with Asda fuels shop price fears

Sainsbury's £12 billion merger with Asda is facing scrutiny after two parliamentary committees raised concerns over the impact on shop prices and suppliers.

ASDA and Sainsbury's are in talks over a 12 billion pound mega merger. Picture: Yui Mok/PA Wire
ASDA and Sainsbury's are in talks over a 12 billion pound mega merger. Picture: Yui Mok/PA Wire

The chairs of the business and environment committees have written to the competition watchdog, urging it to consider issues of “market dominance” and whether the deal will create “local monopolies”.

A merger between the duo – the UK’s number two and three supermarkets – will create a supermarket titan bigger than Tesco with revenues of £51bn and a network of 2,800 Sainsbury’s, Asda and Argos stores.

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Neil Parish, chair of the environment, food and rural affairs committee, said: “Grocery retailers don’t have a gleaming record of treating suppliers well and the Groceries Code Adjudicator’s 2017 survey found that Asda was the worst grocery retailer in the eyes of its suppliers.

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“The cost savings being promised through this merger must not come through squeezing those further down the supply chain.

“I am also concerned that with two supermarkets taking up around 60 per cent of the market, suppliers would be more reluctant to raise complaints about unfair practices.”

The letter flagged concerns that that just two players, the newly merged entity and Tesco, would hold too much power in the retail market.

The Competition and Markets Authority (CMA) has said it was “likely” to probe the deal, which has already sparked concerns over pensions and store disposals that may be required.

The committees have now asked the CMA to outline the length and scope of its investigation, as well as the methodology used to come to any conclusion.

Business committee chair Rachel Reeves said: “This merger threatens customer choice, hands yet more power to mighty supermarket players and heaps more pressure on small and medium suppliers.

“The CMA needs to be a champion of consumers and it must look closely at the impact of this merger on the supply chain as well as the effect on competition in the supermarket sector.”

Sainsbury’s came clean on Monday about its merger with Walmart-owned Asda.

Yesterday Sainsbury’s boss Mike Coupe moved to reassure members of the grocery firm’s pension schemes over the £12bn merger with Asda.

In response to concerns raised by Labour MP Frank Field, who chairs Parliament’s pensions committee, Mr Coupe said the deal “strengthens the pension covenant” and “protects the long-term interests of around 90,000 Sainsbury’s defined benefit pension scheme members”.