Sainsbury’s pleads with CMA over Asda merger as customers promised £1bn in price cuts
Sainsbury’s has claimed there are serious flaws with the competition watchdog’s report into its £12 billion merger with Asda, and argued the tie-up will deliver £1 billion in savings for shoppers as the deal hangs in the balance.
The supermarket said in a stock market update that it strongly disagrees with the Competition and Markets Authority’s (CMA) provisional findings into the merger, which warned the deal could be blocked unless the pair sell off significant stores or even one of the brands.
Sainsbury’s said the CMA’s report contains “significant errors”, both legal and economic.
“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,” the grocery firm said.
Last month, the CMA found 629 areas where there could be a substantial reduction in competition in supermarkets as a result of the tie-up, and a further 290 areas where online competition could be reduced.
The CMA added that it would be “difficult for the companies to address the concerns it has identified”.
But Sainsbury’s and Asda on Tuesday pledged to make a number of post-merger commitments, should it be approved.
It includes investing £1 billion a year in lowering prices by the third year of the deal completing, equating to a 10% cut on everyday items.
The price investment will be funded by an estimated £1.6 billion in cost savings, which will be secured by lowering purchase prices from suppliers, putting Argos stores into Asda, jointly buying shared goods and services and reducing central costs.
Sainsbury’s also promised to cap its fuel gross profit margin to no more than 3.5p per litre for five years, while Asda will guarantee its existing fuel pricing strategy.
Sainsbury’s chief executive Mike Coupe and Asda boss Roger Burnley said: “We are trying to bring our businesses together so that we can help millions of customers make significant savings on their shopping and their fuel costs, two of their biggest regular outgoings.
“We are committing to reducing prices by £1 billion per year by the third year, which would reduce prices by around 10% on everyday items. We are happy to be held to account for delivering on this commitment and to have our performance independently reviewed and to publish this annually.
“We hope that the CMA will properly take account of the evidence we have presented and correct its errors. We have proposed a reasonable yet conservative remedy package and hope the CMA considers this so that we can deliver the cost savings for customers.”
Sainsbury’s will also move to pay small suppliers within 14 days and Asda will continue to pay its small suppliers within that time frame, allaying concerns that SMEs could be disadvantaged by the deal.
The CMA is expected to publish Sainsbury’s and Asda’s responses to its provisional findings imminently, and the antitrust body’s final report is expected by April 30.
Sainsbury’s shares were up nearly 2% in midday trade at 239p.