Asda-Sainsbury’s merger: MPs fear squeeze on suppliers

MPs from two parliamentary committees have called on the competition regulator to examine how the merger of Sainsbury’s and Asda will affect suppliers.

The merger of the UK’s second- and third-largest supermarket chains could hand them control of about 30% of the grocery sales, a similar level to Tesco, meaning two businesses would account for 60% of the market in future.

“The cost savings being promised through this merger must not come through squeezing those further down the supply chain,” warned Conservative MP Neil Parish, chair of the environment food and rural affairs committee.

Parish said such power could mean that suppliers were more reluctant to raise complaints about fair practices for fear of losing a big chunk of business that could not easily be replaced.

Rachel Reeves, Labour MP and chair of the business energy and industrial strategy committee, also called on the Competition and Markets Authority (CMA) to look at how suppliers would be affected.

“This merger threatens customer choice, hands yet more power to mighty supermarket players and heaps more pressure on small and medium suppliers. 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.”

MPs wrote the letter after questioning the farming minister, George Eustice, and the grocery code adjudicator Christine Tacon, who regulates supermarkets’ relationships with direct suppliers, in parliament on Wednesday.

Tacon made clear her remit did not cover the prices agreed between supermarkets and their suppliers, but only ensured that they kept to their contracts.

The regulator added that she was only responsible for direct suppliers, meaning that she does not deal with many farmers and other small food producers who provide their goods to supermarkets via wholesalers or processors.

Parish suggested in the meeting that the government was “not concerned at all by the scale of these two major retailers that will be totally dominant in the market place”, and suggested “Tesco and Sainsbury’s might decide to get together as the government didn’t turn a hair [in relation to Asda and Sainsbury’s]”.

Eustice said it was up to the CMA to “methodically” examine the implications of the merger for consumers and the wider market and take any action necessary. He added that it was “open to the CMA to consider the impact on the market as well”.

The CMA has already said it is likely to review Sainsbury’s deal with Asda but declined to comment in advance of an inquiry opening. In the next few weeks it is expected to announce whether it will carry out a broad brush “phase 1” review which would last up to 40 days or go straight to a more detail “phase 2”, in which it will examine competition concerns at a local level around the UK and taking up to 24 weeks.