An unidentified major supplier to the UK supermarket sector has said that the planned merger between Sainsbury's and Asda would likely 'harm consumers' and open the door for actions that would be detrimental to suppliers, a submission to the Competition and Markets Authority (CMA) has said.
The submission to the CMA, by a supplier known only as 'Supplier B', said that the planned merger will lead to a 'further swing in bargaining power in favour' of Sainsbury's/Asda.
This, in turn, could lead to the parties 'pushing for unrealistic price cuts and disproportionate investment from suppliers', as well as 'refusing to list new products' or 'positioning private label products to the detriment of branded products'.
In addition, the supplier fears that the merger has the potential to create a duopoly between Tesco and the combined entity, which could 'facilitate collusion [...] ultimately harming consumers'.
Innovation Slowdown
The submission from Supplier B, follows a similar submission by another supplier last week (Supplier A), which stated that the merger would likely lead to a slowdown in supplier innovation, which, in turn, would 'likely result in a substantial reduction in consumer choice'.
Supplier A also expressed fears that the combined Sainsbury's-Asda entity would likely lead to increased prices, despite Sainsbury's chief executive, Mike Coupe, stating previously that the merger would lead to a 10% reduction in prices.
'After “year one” of the Anticipated Merger, our strong expectation is that any 10% price reduction secured by the merged entity will very quickly become unsustainable,' the supplier wrote in a submission.
'This is because the merged entity [...] will hold a very significant market share, particularly in certain locations; and [...] will therefore have both the ability and the incentive to increase retail prices to customers (without any real fear of such customers potentially switching to other retailers),' it further stated.
Pro-Competitive Merger
In a statement issued to the CMA, Sainsbury's and Asda wrote that they believed that the merger was 'pro-competitive and will result in substantial benefits to consumers across the UK'.
The retailers dismissed notions that the merger would lead to ' local or national competition concerns', saying that Sainsbury's and Asda offer a different proposition to the other retailers in the marketplace.
'Given the highly competitive nature of the UK grocery market, consumers will thus benefit not only from the improved offering of the Parties, but also from the dynamic and market-wide increase in rivalry that will result,' they said.
Earlier this week, the latest Kantar Worldpanel market share figures saw Sainsbury's post a 0.6% decline in sales in the 12 weeks to 4 November, to sit on 15.8% market share, while Asda posted a 2.6% increase in sales in the same period, to sit on 15.3% market share.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
