The proposed merger of Sainsbury’s and Asda could lead to increased pressure on farmers and reduce the choice and innovation of products available for the shopper.
This is according to the NFU, who told the Competition and Markets Authority (CMA) the farming industry's concerns on the possible creation of the country's largest retailer.
In giving oral evidence, NFU head of food and farming Philip Hambling said that farmers are concerned whether the company can deliver its proposed 10% saving for shoppers without passing this additional pressure on to farmers.
There remains big questions around where the savings are coming from and who is paying the difference.
A report released earlier this year highlights how suppliers will bear 70 percent of the brunt of the merger's “efficiencies”.
Mr Hambling told the CMA: “The consolidation of retail buying power is one of the biggest concerns farmers and growers have about the proposed merger.
“As the foundation of the UK’s largest manufacturing sector food and drink, there are serious fears that farm businesses will be the ones to take any additional price pressure.
“At a time when farms are already facing intense price pressure, the prospect of a further squeeze on price leaves farmers concerned about the potential impacts on their businesses.”
'Squeezing margins'
The NFU has concerns that this merger’s desire to reduce prices could leave farmers as the ones to take the brunt of significant market disruption as a result.
The union believes this would impact farm businesses’ ability to supply at ever lower prices.
Mr Hambling added: “Farmers and growers provide the British public with safe, traceable and affordable food for all incomes and it is vital that retailers and suppliers continue to invest in productive and progressive farm businesses.
“Continually squeezing margins can take away the ability of the food and farming industry to invest and improve quality, range and sustainability.”
The NFU is calling for “careful consideration” of the consequences this could bring to shoppers in terms of product choice and innovation.
“Our overall concern is the potential this merger has for market disruption and the associated negative effects for the public. We will continue our analysis and engage with the CMA in its investigation,” Mr Hambling said.
In-depth review
In August, the CMA opened its initial Phase 1 investigation into the merger and announced the companies had requested a ‘fast-track’ referral to Phase 2.
The CMA has now confirmed, through its Phase 1 investigation, that the deal raises sufficient concerns to be referred for a more in-depth review.
These concerns will be considered further in the Phase 2 investigation, along with other issues raised so far with the CMA – including those relating to fuel, general merchandise and increased ‘buyer power’ over suppliers.
The Phase 2 investigation is a more in-depth review, led by an inquiry group chosen from the CMA’s independent panel members.
The group will gather evidence – in particular through multiple customer surveys and engagement with other retailers, suppliers and industry bodies – to inform its detailed analysis.
