By Mark Fairlie
Concerns have been raised regarding the proposed merger between supermarket giants Sainsbury’s and Asda as new figures suggest the two currently dominate more than 30% of the market between them.
The data from Kantar Worldpanel, as reported in the Daily Telegraph, revealed that around nine million households in the UK shopped at both chains within the last three months alone. “With Tesco already holding a 30% stake in the marketplace, it cannot be right for just two retailers to hold almost 60% of the market,” Green MEP Molly Scott Cato told Farmers Weekly.
Impact of the merger on local communities
Further insights have suggested that Brighton, Kirkcaldy, Lancaster, Paignton and Torquay could all become ‘monopoly’ towns should the merger go ahead – leading MPs across the country to demand protection for local communities.
Towns that are home to both Sainsbury’s and Asda chains could potentially see a loss of jobs and price rises should all local supermarkets come under the control of a single company.
“You only have to look how close the Asda and Sainsbury’s are in Torquay and Paignton,” Kevin Foster, the local MP, told the Guardian. “It does raise concerns about how long a unified company would want to operate two stores.”
He went on to say that this could also pose an issue for customers when choosing where to shop. “As it stands, there are only five major supermarkets in Torquay and in Paignton,” Foster added, “and four of them are owned by what would be a combined company.”
Despite these concerns, Sainsbury’s chief executive Mike Coupe has insisted that there are no plans to close any stores as a result of the merger and that the chain will continue to lower prices for consumers.
For MP Lesley Laird, however, this provides little comfort. Laird has said that Sainsbury’s and Asda currently enjoy more than 50% of supermarket custom in Kirkcaldy, and the merger poses the potential to push local competitors out.
“We’ve heard there will be no store closures, but that’s not legally binding for the long-term and we’ve heard no assurances that the deal won’t result in job losses, changes to pay, or terms and conditions,” she said.
MPs call for action
Two powerful committees, in particular, have come together to send a joint letter to the Competition and Markets Authority who will be reviewing the merger.
The chairmen of both the Business, Energy and Industrial Strategy (BEIS) and Environment Food and Rural Affairs (Efra) committees have urged the department to thoroughly scrutinise the proposed deal and have called for a full assessment of the merger’s impact on the supply chain, competition, and local communities.
Chairwoman of BEIS, Rachel Reeves, believes that the proposed merger poses a ‘threat’ to customer choice, whilst giving the major chains greater power and putting even more pressure on smaller suppliers.
Reeves and Efra chairman Neil Parish have asked for more information on the timing, length and scope of the CMA’s upcoming investigation. They have also asked to see the criteria that will be used in order to determine whether the merger would create local monopolies, ensuring one chain does not dominate the market in certain towns.
Reeves said, “the CMA needs to be a champion of consumers and it must look closely at the impact of this merger on the supply chain as well as the effect on competition in the supermarket sector.”