Two influential parliamentary committees have written a joint letter to the Competition and Markets Authority highlighting their concerns over Asda and Sainsbury's proposed merger.
The Business, Energy and Industrial Strategy (BEIS) and Environment Food and Rural Affairs (EFRA) have raised concerns over the impact the merger will have on the grocery supply chain.
In particular, the letter highlights the market dominance that the merger would create for the new Asda/Sainsburys business and Tesco.
Of interest to the committees is the timing, length and scope of the CMA investigation, as well as the criteria that will be used to determine whether the merger will create local monopolies or require the stores to divest premises.
Rachel Reeves, Chair of the BEIS Committee said the merger threatens consumer choice. She said it “hands yet more power to mighty supermarket players and heaps more pressure on small and medium suppliers”.
“The CMA needs to be a champion of consumers and it must look closely at the impact of this merger on the supply chain as well as the effect on competition in the supermarket sector,” Ms Reeves explained.
Neil Parish, Chair of the EFRA Committee highlighted the fact that grocery retailers don’t have a "gleaming record" of treating suppliers well.
He said the Grocery Code Adjudicator’s (GCA) 2017 survey found that Asda was the worst grocery retailer in the eyes of its suppliers.
“The cost savings being promised through this merger must not come through squeezing those further down the supply chain. 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,” Mr Parish said.
Grocery giant
The deal between Asda and Sainsbury's will create a grocery giant overtaking Tesco as number one in the sector, with combined revenues of £51bn.
The two retailers have promised to slash prices on products by up to 10%, if their merger goes through.
The farming industry has viewed news of price cuts as a huge worry, with many in the industry already battling through poor financial returns.
The news has led a Green MEP to call on the European Union to block the merger, saying it would work against the interest of food producers.
MEP Molly Scott Cato said the UK’s food retail market is on a "conveyor belt towards increased concentration and reduced competition".
The Tenant Farmers Association (TFA) has also called for the government to rethink its refusal to extend the remit of the Groceries Code Adjudicator.
The organisation said there is a growing recognition that the food supply chain in the UK is "dysfunctional", and it is farmers who bear the brunt of the problems that this produces.
Another concern among farmers are the two retailers' differing sourcing policies. Latest shelf watch figures have highlighted the "vast difference" in Sainsbury's and Asda's approach to sourcing British pork.
