Supermarkets pledge 拢1bn price cuts in merger fightback
The CMA said the tie-up could mean higher prices and lower quality but the companies say it will mean big savings for shoppers.
Tuesday 19 March 2019 16:42, UK
Sainsbury's and Asda have pledged to deliver price cuts worth 拢1bn as they fight back against a competition ruling that has thrown their planned merger into jeopardy.
The two supermarkets also claim to have identified "significant errors" in findings by the Competition and Markets Authority (CMA), which effectively block the deal unless they divest hundreds of stores or even spin off one of the brands.
They have submitted a detailed response to the report in which they have offered to sell off stores and petrol stations across both brands in order to address "reasonable concerns".
Those numbers are yet to be published but are expected to be well below the 300-plus implied by the CMA findings and closer to the 100 to 150 range previously pencilled in by analysts.
Sainsbury's and Asda announced plans for the £13bn merger last April, saying the two businesses would retain their separate brand names but create efficiencies which would cut costs.
The CMA last month published a provisional report on the tie-up which identified "extensive" concerns that it could lead to higher prices and lower quality.
It said it would be "difficult" for the companies to resolve the concerns so that the deal could go ahead.
But the two supermarkets are challenging what they say are errors in the way in which the competition body carried out its scrutiny, as well as the threshold by which the CMA chose to identify competition problems, "therefore generating an unreasonably high number of areas of concern".
The companies have also pledged to deliver price cuts that will mean £1bn worth of lower prices are delivered by the third year after the merger completes, as well as measures to hold down petrol prices.
They said the price commitments would be independently reviewed by a third party, with the results published every year.
Sainsbury's chief executive Mike Coupe and Asda chief executive Roger Burnley said in a joint statement: "We are trying to bring our businesses together so that we can help millions of customers make significant savings on their shopping and their fuel costs, two of their biggest regular outgoings.
"We hope that the CMA will properly take account of the evidence we have presented and correct its errors.
"We have proposed a reasonable yet conservative remedy package and hope the CMA considers this so that we can deliver the cost savings for customers."
Shares in Sainsbury's - which fell 18% after the competition body's February warning - climbed 2% after the supermarkets' statement and ended the day 0.8% higher.
The CMA is due to deliver its final report by 30 April.