22nd Mar 2019 14:22
LONDON (Alliance News) - J Sainsbury PLC and Walmart Inc-owned Asda offered to sell up to 150 stores as part of their effort to address competition concerns about their proposed merger, a document published on Friday showed.
The two supermarkets made the remarks in response to a notice of possible remedies from the UK Competition & Markets Authority, which at the end of February released its preliminary statement on the merger highlighting significant competition issues, suggesting it would be unlikely to proceed.
Back then, the regulator said the merger would be blocked unless the grocers were to sell a significant number of stores, or possibly even one of the two brands.
In document published on Friday, which was dated March 6, Sainsbury's and Asda offered to sell between 125 and 150 supermarkets and 32 petrol forecourts, in order to address the regulator's concerns. This would be seem to fall far short of the CMA's findings, which highlighted 629 areas where there could be a substantial reduction in competition as a result of the merger, with further 290 areas where online competition could be reduced.
"The CMA's analysis ignores both the evidence and the realities of how customers shop today. The CMA has applied a threshold for identifying local areas of concern that does not fit the facts and is far below the most conservative standards applied in previous cases," the supermarkets said.
"This means that the CMA identifies an area of concern where an Asda and a Sainsbury's store are within seven minutes' drive time of each other, irrespective of whether there are one or six competitors in the same area. Essentially, a competition test that ignores competition.
"Furthermore, the CMA's remedy proposal is impossible to implement. It is prohibition in all but name and deprives customers of lower prices, better quality and better service."
Moreover, Sainsbury's and Asda reiterated their belief that the tie-up will allow for price cuts to be passed on to consumers. The two had on Tuesday committed to deliver GBP1 billion annually in cost savings through lower prices by the third year post- merger, reducing prices by 10% on everyday items.
Furthermore, Sainsbury's committed to cap its fuel gross profit margin at no more than 3.5 pence per litre for five years, while Asda will guarantee its existing fuel pricing strategy.
On Tuesday, the two supermarkets confirmed submitting a response to the CMA while stating that they "strongly disagree" with the regulator's findings and have found "significant errors" in the regulator's analysis.
Among the "errors", was the CMA's choice of a threshold for identifying competition problems that "does not fit the facts and evidence in the case". Furthermore, the threshold was set at an "unprecedentedly low level", therefore generating an unreasonably high number of areas of concern, Sainsbury's explained.
The CMA will publish its final decision on the merger on April 30.
Sainsbury's shares were trading 0.2% lower at 237.00 pence each on Friday afternoon.
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