‘Worst of all possible worlds’ threat

A merger between supermarket giants Sainsbury’s and Asda was thrown into question today (February 20) after the competition watchdog said it found “extensive concerns” over the proposed tie-up.

The Competition and Markets Authority (CMA) which had been investigating the merger to determine whether it would reduce competition and choice for shoppers, said this morning that it was “likely to be difficult for the companies to address the concerns [the CMA] has identified”.

Among these concerns was a “substantial lessening of competition at both a national and local level” as well as higher prices for groceries, higher fuel prices and less and worse quality for shoppers.

When the proposed merger was first announced, Sainsbury’s and Asda tried to sell the deal to the public by highlighting that the tie-up would cut prices for customers by 10 per cent.

But Warwick Business School professor John Colley told the Guardian that it was highly doubtful that consumers would benefit.

“Major savings through the merger in terms of reduced overheads, buying prices, and store closures will not be passed onto consumers,” he said. “It seems the only major beneficiaries of this merger would be the Asda-Sainsbury’s shareholders.”

Sainbury’s boss Mike Coupe, who came under fire last year for being caught on camera singing the Broadway tune ‘We’re in the money’ before an ITV interview about the merger, slammed the CMA’s findings.

“They have fundamentally moved the goalposts, changed the shape of the ball and chosen a different playing field,” he said on a BBC Radio 4’s Today programme. “This is just outrageous.”

The CMA has said that there are now two options – either the merger is prohibited or Sainsbury’s and Asda would have to divest a ‘significant’ number of stores and depots to address the watchdog’s concerns over competition.

Unite, which has 12,000 members between Sainsbury’s and Asda, has long held reservations about the merger, especially over what it would mean for workers, who would likely face store closures and job losses.

Unite has also spoken out against the failure of the CMA to consider the effects the merger would have on the workforce, especially at a time of severe concern about food security and rising prices due to Brexit uncertainty.

The union has warned against the CMA forcing the sale of stores and distribution centres to get the merger over the finish line.

“The CMA has totally failed to take account of the workforces which are the bedrock of both companies and whose hard work has made both companies such successful retailers,” said Unite national officer for the food industry Sue Pollard.

“At a time of growing uncertainty about food security and rising prices, the government should have intervened and thoroughly examined how this potential merger will affect the food supply chain across the UK. Its failure to do so is a complete abdication of its responsibility.

“Unite has sought assurances from Sainsbury’s on jobs and stores, but any promises that are secured will become meaningless if the CMA orders the sale of stores and distribution centres,” she added. “Such a decision risks being the worst of all possible worlds.”

Unite has previously urged the government to revise how decisions are made over mergers and to beef up the UK’s notoriously lax takeover laws.

“Competition cannot be the sole determining factor in whether the merger between Sainsbury’s and Asda goes ahead,” Unite assistant general secretary Diana Holland said last year. “Government ministers need to ensure that wider considerations are given equal prominence and overhaul the UK’s takeover rules to strengthen the voice of workers and stop short term speculators.”