Sainsbury’s and Asda chiefs to face grilling by MPs over merger

There are fears that suppliers could get squeezed as a result of a merger
There are fears that suppliers could get squeezed as a result of a merger

The chief executives of Sainsbury’s and Asda have been summoned before MPs to answer questions on how the supermarkets’ proposed £12 billion merger will impact farmers, suppliers and consumers.

Sainsbury’s Mike Coupe and Asda’s Roger Burnley will appear before the Environment, Food and Rural Affairs Committee on June 20, with the treatment of suppliers to be a focus of the grilling.

“Grocery retailers do not have a great record of treating their suppliers well, and some of them are cautious about the proposed Sainsbury’s and Asda merger,” said committee chair Neil Parish .

“My committee is holding this session to investigate how the biggest potential shake-up of the grocery market in recent years could affect British farmers and suppliers, as well as consumers.”

A merger between the duo, the UK’s number two and three supermarkets, will create a firm bigger than Tesco with revenues of £51 billion and a network of 2,800 Sainsbury’s, Asda and Argos stores.

They have pledged to cut prices on everyday products by around 10% after the deal.

But fears have been expressed that suppliers could get squeezed as a result, with the tie-up giving the merged entity increased buying power.

The supermarkets have claimed that only large suppliers will experience any pain.

Mr Parish and the chairs of the Business committee earlier wrote to the competition watchdog, urging it to consider issues of “market dominance” and whether the deal will create “local monopolies”.

“The cost savings being promised through this merger must not come through squeezing those further down the supply chain,” Mr Parish said.

“I am also concerned that with two supermarkets taking up around 60% of the market, suppliers would be more reluctant to raise complaints about unfair practices.”

The Competition and Markets Authority (CMA) is currently probing the deal and is in the “pre-notification” phase, which entails gathering information from Sainsbury’s and Asda before a formal inquiry can begin.

A Sainsbury’s spokeswoman said: “Combining Sainsbury’s and Asda would mean lower prices and a reduced cost of living for customers across the UK, while contributing even more to the nation’s economy.

“We are proud of our track record of helping suppliers to grow their businesses and believe the proposal would create new opportunities for small and large suppliers alike.

“We look forward to explaining these and other benefits in more detail before the EFRA Select Committee.”