Farming News - Sainsbury’s & Asda to be interrogated by MPs over it's £12bn merger announcement

Sainsbury’s & Asda to be interrogated by MPs over it's £12bn merger announcement

13 Jun 2018
Frontdesk / Finance

The heads of Sainsbury’s and Asda are set to be grilled by MPs on questions regarding the grocers’ proposed £12 billion merger.

Sainsbury’s chief executive Mike Coupe and Asda chief executive Roger Burnley will appear before the Environment, Food and Rural Affairs (EFRA) Committee on the 20th June.

It’s expected that the interrogation will involve the proposed merger’s impact on farmers, suppliers and consumers.

“Grocery retailers do not have a great record of treating their suppliers well, and some of them are cautious about the proposed Sainsbury’s and Asda merger,” committee chair Neil Parish MP said.

“My committee is holding this session to investigate how the biggest potential shake-up of the grocery market in recent years could affect British farmers and suppliers, as well as consumers.”

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.

Commenting on the merger today Michael Gove said:

“The proposed Sainsburys-Asda merger could have a significant impact on British farmers and suppliers. Whilst we appreciate the need for retailers to remain competitive, we are concerned that the merger may lead to one retailer dominating the market and putting pressure on growers and suppliers.  We are looking at the role of the Groceries Code Adjudicator in relation to this, and the extent of its current remit and powers.”

The Competition and Markets Authority (CMA) has since 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 from Sainsbury’s and Asda 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.

Sainsbury’s and Asda have said only large suppliers would experience any pain.

Parish, as well as the chairs of the business committee, earlier wrote to the CMA and urged it to consider issues of “market dominance” and whether the mega merger would create “local monopolies”.

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

“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.”

Sainsbury’s said: “Combining Sainsbury’s and Asda would mean lower prices and a reduced cost of living for customers across the UK, while contributing even more to the nation’s economy.

“We are proud of our track record of helping suppliers to grow their businesses and believe the proposal would create new opportunities for small and large suppliers alike.

“We look forward to explaining these and other benefits in more detail before the EFRA Select Committee.”

Meanwhile, the groceries code adjudicator Christine Tacon recently said she had “no concerns at all” about the size of Sainsbury’s-Asda, as bigger retailers were often easier to regulate.

She added that she hoped the merger would bring Asda up to Sainsbury’s standards in terms of how it treated it's suppliers.