Tue, 22nd May 2018
MPs are putting increasing pressure on regulators regarding the Sainsbury’s and Asda merger, to scrutinise the deal and how suppliers might be affected. The Business, Energy and Industrial Strategy committee and the committee for Environment, Food and Rural Affairs have both written to the competition watchdog, amidst concerns that the deal could be harmful to the supply chain.
The tie-up will see the group in charge of 2,800 stores, and a combined revenue of more than fifty billion. The company is aiming to drive cost-savings through increasing buying power with suppliers - of which a large number are multi-national companies. In a letter to the CMA, the chairs of the committees wrote that they have concerns over the impact that the merger would have on the supply chain, because the combined power of the new business and its next-biggest competitor, Tesco Plc., would control more than 60% of the retail market.
The CMA says that the deal is likely to be earmarked for review. Sainsbury’s Chief Executive Mike Coupe has spoken out to reassure MPs that the merger is not going to put the company’s retirement scheme at risk. Coupe says that the pension covenant would be strengthened by the merger, protecting the 90,000 people who are a part of the defined benefit scheme at this time.
While these reassurances will be valuable, concerns remain about the impact that the merger could have on the supermarket-supplier relationship, leaving suppliers afraid to negotiate, because of the lack of other clients.