Sainsbury’s-Asda merger ‘could lead to higher prices and less consumer choice’

Sainsbury’s £12 billion merger with Asda could result in higher prices and reduced choice for consumers, according to supermarket rivals and suppliers.

The Competition and Markets Authority (CMA), which is probing the deal, on Monday published a summary of responses to the tie-up.

It takes in the views of rival supermarkets, wholesalers, suppliers and members of the public.

“A number of submissions raised concerns about the impact of the proposed merger at the national level, on the belief that it would lead to increased concentration in the market and fewer national players, with two companies – Tesco and the combined Sainsbury’s/Asda – holding high market shares.

“Some respondents suggested that this could give rise to higher prices, reduced choice, or a loss of innovation within the supply of groceries.”

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

They have pledged to cut prices on everyday products by around 10% after the deal.

But fears have been expressed that suppliers could get squeezed as a result, with the tie-up giving the merged entity increased buying power.

“Some respondents raised concerns that the proposed merger would provide the combined company with increased buyer power, which they said would allow it to negotiate lower prices with suppliers and/or to pass on excessive risks and unexpected or disproportionate costs to suppliers,” the CMA’s document read.

Some suppliers could also be forced out of business, it added.

For their part, Sainsbury’s and Asda have claimed that only large suppliers will experience any pain.

Sainsbury’s boss Mike Coupe and his Asda counterpart Roger Burnley will appear before the Environment, Food and Rural Affairs Committee on June 20, with the treatment of suppliers to be a focus of the grilling.

The CMA is in the “pre-notification” phase of its investigation, which entails gathering information before a formal inquiry can begin.

Sainsbury’s said in a statement: “We are working closely with the CMA and look forward to making our case when the formal review begins.

“The combined business would aim to reduce prices on everyday items by around 10%, lowering the cost of living for millions of UK households.”