Sainsbury’s and Asda pledge £1bn in price cuts

Sainsbury’s and Asda have announced plans to deliver £1bn of lower prices annually by the third year after its proposed merger.

It comes after The Competitions and Market Authority (CMA) said it had provisionally found “extensive competition concerns” over the merger, and said that prices could rise at a large number of Sainsbury’s and Asda petrol stations, as well as concerns that the merger could lead to a “substantial lessening of competition” at both a national and local level.

However, both supermarkets said they “strongly disagree” with the CMA’s Provisional Findings and added they found the watchdog’s analysis of the proposed merger to contain “significant errors”.

In a statement the grocers said: “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.”

Sainsbury’s and Asda have also responded to the Notice of Proposed Remedies by outlining supermarket and petrol forecourt divestments across both brands that would “satisfy reasonable concerns regarding any substantial lessening of competition”, as a result of the merger. In addition, Sainsbury’s and Asda have committed post-merger:

• To invest £300m in the first year of the combination and a further £700m over the following two years as the cost savings flow through.
• Sainsbury’s will cap its fuel gross profit margin to no more than 3.5 pence per litre for five years; Asda said it will guarantee its existing fuel pricing strategy.
• The price commitments will be independently reviewed by a third party and the Parties will publish the performance each year, holding them to public account

Sainsbury’s CEO, Mike Coupe, and Asda CEO, 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 £1bn 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.”

They added: “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.”