Supermarket merger’s impact on supply chain under scrutiny

The effect the proposed Sainsbury’s and Asda merger could have on the supply chain will be included in the competition watchdog’s formal investigation.

The Competition and Markets Authority (CMA) has been gathering the information needed to start its inquiry since the merger’s announcement in April, and the launch was announced on Thursday (23 August).

The first phase will include a detailed assessment into how the deal could lead to less choice, and therefore higher prices or worse quality services, across the range of products sold by both supermarkets.

See also: Industry reacts to Asda-Sainsbury’s merger

Crucially for farmers, the CMA will also look at whether the merged company could use its increased buyer power to squeeze suppliers.

Superpower supermarket

Sainsbury’s, the UK’s second-biggest food retailer, struck a deal to takeover Walmart-owned Asda four months ago. The merger would create the biggest UK supermarket group in history, with about a 26% share of the groceries market.

The news concerned farm leaders who spoke out against the plan, stating the “rhetoric” of more product for less money for shoppers meant the squeeze on suppliers would only get tighter and prices for suppliers would get lower.

The NFU has raised these concerns, including the potential negative effects on competition and consumer interest, with the CMA, and is pleased to see the investigation begin.

NFU director general Terry Jones said: “The consolidation of retail buying power has been of great concern to our members for many years.

“Suppliers’ ability to innovate and invest could ultimately be impacted if this enlarged business abuses its market power, particularly transferring excessive risk and unexpected costs on to suppliers.

“Ultimately, this will impact on choice and availability for shoppers.”

Fast-track inquiry

Sainsbury’s and Asda have asked the CMA to move more quickly to the in-depth part of the inquiry through a fast-track process, which the authority is expected to accept unless it receives any valid objections.

Andrea Coscelli, chief executive of the CMA, said: “We will carry out a thorough investigation to find out if this merger could lead to higher prices or a worse quality of service for shoppers and will not allow it to go ahead unless any concerns we find are fully dealt with.”

The CMA is now inviting views by 31 August on how the merger could affect competition, by post to Sainsbury’s/Asda merger team, Competition and Markets Authority, Victoria House, Southampton Row, London, WC1B 4AD or by email to SainsburysAsda@cma.gov.uk.

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