Torquay, Paignton, Lancaster, Brighton and Kirkcaldy could become Sainsbury’s “monopoly” towns after the planned merger with Asda, prompting MPs to demand action to protect local communities.
The proposed merger of the two supermarket chains will leave little or no major supermarket competition in the towns, opening the possibility of a local monopoly and a headache for competition authorities, which could order a sell-off but find no buyers.
Sainsbury’s vows to slash prices after Asda merger
The Competition and Markets Authority (CMA) is expected to carefully scrutinise Sainsbury’s planned £7.3bn takeover of Asda under which the latter’s US parent, Walmart, will become a major shareholder in the combined group.
MPs raised concerns that stores might close, putting local jobs at risk, or that communities might face price rises if all nearby supermarkets come under the control of one company.
“You only have to look how close the Asda and Sainsbury’s are in Torquay and Paignton, said Kevin Foster, the local MP. “It does raise concerns about how long a unified company would want to operate two stores. There is also the impact this has on the ability to choose where to shop. As it stands there are only five major supermarkets in Torquay in Paignton and four of them are owned by what would be a combined company.”
In Kirkcaldy, MP Lesley Lairdis concerned about price rises. “Sainsbury’s and Asda already enjoy approximately 50% of supermarket custom here in Kirkcaldy and this merger is a concern given its potential to squeeze local competitors,” she said.
“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, [or] changes to pay, terms and conditions.”
The issue is particularly sensitive in the Scottish town, which only recently lost a Tesco store as part of widespread closures by the UK’s biggest grocer.
In an investigation that is expected to last at least six months, the regulator is likely to examine hundreds of local areas to ensure competition is maintained. A key question of the investigation, which is expected to be launched within weeks, will be whether only large traditional supermarkets such as Tesco and Morrisons are true competitors, or if discounters such as Aldi and Lidl or online players such as Ocado and Amazon can now provide a viable alternative in local areas.
In Brighton, where the three major supermarkets consist of two branches of Sainsbury’s and an Asda, local MP Caroline Lucas said the merger would further decrease choice. “It is small businesses that provide the economic backbone to Brighton and Hove, and I know many people will be worried that this merger could further entrench the power of supermarkets and put our local economy at risk. The merger also risks driving down standards and wages for farmers, and further reducing other workers’ salaries. The CMA should reject this bid – and the government should urgently investigate measures to reduce the power of supermarkets,” she said.
In Lancaster, Asda and Sainsbury’s also dominate. Cat Smith, MP for Lancaster and Fleetwood, said: “If there is such a monopoly for Sainsbury’s and Asda then there’s limited choice and smaller players like Booths will struggle against that. That’s a worry, given that Booths is a Lancashire company founded in Blackpool with a headquarters in Preston.”
She added: “I’m worried about the impact further down the supply chain, especially as so many in my constituency are in the business of producing food.”
When the regulator considered the merger of Morrisons and Safeway in 2003, it divided grocery competition into three categories; one-stop supermarkets with a sales area of more than 1,400 sq metres [15,000 sq ft], mid-sized stores with an area of 1,400 to 2,800 sq metres, and then local convenience stores. For the largest stores it looks for similar competitors within a 10-minute drive in urban areas or a 15-minute drive in rural communities.
If the combined business has too big a share of the market, it can force the sale of stores to a restricted list of strong competitors. But with sales at many large supermarkets falling back, there are concerns that strong bidders may be few and far between.
Until very recently the regulator had not considered discounters such as Aldi and Lidl, which typically stock fewer than 3,000 different products, as sufficient competition for a full-scale supermarket, which usually stocks more than 30,000 items. But in its assessment of Tesco’s recent merger with Booker, the regulator hinted that it had now changed its view.
Foster said the matter should be carefully considered. He said: “I accept the market has changed, particularly with growth of online retail, but it has not changed fundamentally,. A large number of people still go every week and do a large shop.”
The MPs’ comments come after MPs from two influential parliamentary committees called on the competition regulator to examine how the merger of Sainsbury’s and Asda would affect suppliers.