Sainsbury’s and Asda respond to CMA on merger

Sainsbury’s and Asda have fired back at the Competition and Markets Authority, responding to its provisional findings into the proposed merger.

Last month, the CMA said that it had found ‘very significant competition concerns in a number of areas’, stating that customers could see higher prices and less choice as a result of the proposed deal.

However, Sainsbury’s and Asda strongly disagree with the CMA’s Provisional Findings and have found the CMA’s analysis of the proposed merger to contain significant errors. This is compounded by the CMA’s choice of a threshold for identifying competition problems that does not fit the facts and evidence in the case and that is set at an unprecedentedly low level, therefore generating an unreasonably high number of areas of concern.

In addition, Sainsbury’s and Asda have made the following post-merger commitments:

• To deliver £1 billion of lower prices annually by the third year post-completion. To invest £300m in the first year of the combination and a further £700m over the following two years – this would reduce prices by around 10% on everyday items.
• Sainsbury’s will cap its fuel gross profit margin to no more than 3.5 pence per litre for five years, while Asda will guarantee its existing fuel pricing strategy.
• The price commitments will be independently reviewed by a third party and the parties will publish the performance each year, holding them to public account.
• Sainsbury’s will move to pay small suppliers (turnover with the business of <£250k) within 14 days, while Asda will continue to pay its small suppliers within 14 days, in line with existing commitments.

Sainsbury’s and Asda are ‘strongly encouraging’ the CMA to recognise that there is a clear benefit to consumers from combining the two companies.

The CMA is expected to publish Sainsbury’s and Asda’s responses to the Provisional Findings and Notice of Possible Remedies in due course. Final Report is expected by April 30.