The Environment Food & Rural Affairs and Business, Energy & Industrial Strategy Committees have today written a joint letter to the Competition and Markets Authority in relation to the proposed Asda and Sainsburys merger.  The letter raises concerns over the impact that the merger will have on the grocery supply chain, particularly regarding the market dominance that this would create for the new Asda/Sainsburys business and Tesco Plc. 

Of interest to the Committees is the timing, length and scope of the CMA investigation, as well as the criteria that will be used to determine whether the merger will create local monopolies or require the stores to divest premises.

The merger of Asda & Sainsbury's means they will overtake Tesco as number one, with combined revenues of £51bn.

Suppliers are concerned that they will be squeezed and bear the brunt of the price cuts promised by the two supermarkets. According to data analysts at InifityQS, suppliers and manufacturers may be expected to reduce their wholesale prices and therefore reduce production costs if they hope to survive within this competitive environment.

Neil Parish, Chair of the EFRA Committee said:

“Grocery retailers don’t have a gleaming record of treating suppliers well and the Grocery Code Adjudicator’s 2017 survey found that Asda was the worst grocery retailer in the eyes of its suppliers. 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% of the market, suppliers would be more reluctant to raise complaints about unfair practices.”

Rachel Reeves, Chair of the BEIS Committee, 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”.

The Tenant Farmers Association (TFA) is calling for the Government to rethink its refusal to extend the remit of the Groceries Code Adjudicator (GCA) in light of the proposed merger between Asda and Sainsbury’s.

George Dunn said: 

“When Sainsbury’s boss Mike Coupe pledged to cut prices on everyday products by 10%, alarm bells rang out across the industry. It is suppliers who will be expected to shoulder the cost of these savings.”

“Poor returns, last-minute changes in orders and specifications, unfair competition from abroad and poor labelling are all contributing to the pressures at farm level.

“Given that the vast majority of farm produce passes through at least one processor, if not more, before it hits supermarket shelves, the Adjudicator is therefore unable to consider the impact of retailer activity on many farmers”.