Morrisons and Tesco speak out against Sainsbury’s-Asda merger

Morrisons and Tesco have become the latest grocers to speak out over the proposed Sainsbury’s-Asda merger with Tesco telling a Competition and Markets Authority (CMA) hearing “extensive remedies” are needed.  

Britain’s current largest grocer told the competition watchdog that the “four-to-three” deal – referring to the ‘Big Four’ becoming a ‘Big Three’ – is a “challenge in terms of economics” as there are “few direct customer benefits” and suggested that it could lead to higher petrol prices in some areas.

Tesco also noted that Sainsbury’s and Asda are not proposing to make any big operating cost savings, as they are going to keep the brands and the propositions separate. Tesco said that “nearly all” of the announced efficiencies rely on harmonising costs and prices from suppliers and that this is a “big ask”.

In a separate hearing Morrisons told the CMA the proposed merger will result in the creation of an “effective duopoly” formed by Tesco and the merged entity, as they will be controlling in “excess of 60%” of the market.

Morrisons added that there are many local areas across the UK in which any of the ‘Big 4’ are present, but not Morrisons, and that in these areas Tesco and the merged entity would “not necessarily have to compete”, as they would be “dominating the market”.

Morrisons said that the impact of the proposed merger in online services will be even larger, as post-merger approximately 75% of the market will be controlled by Tesco and the merged entity.

Sainsbury’s and Asda, announced in April that they intended to join forces in a £12bn transaction that would create Britain’s biggest grocer. Sainsbury’s boss Mike Coupe said the merger could generate at least £500m of synergies and result in lower prices, better quality and more flexible ways to shop for customers.

However in August the CMA launched its formal investigation into the proposed merger evaluating how the deal could affect competition for UK shoppers and is currently onto its second phase of the investigation.

In response to the comments a Sainsbury’s spokesperson told Retail Sector: “We are working constructively with the CMA and Inquiry panel as they conduct their in-depth review into the proposed merger.

“Customers will be the big winners from the combination. By bringing our two businesses together, we will be able to invest further in range, quality and customer service, while lowering prices and reducing the cost of living for millions of UK households.”