Sainsbury's and Asda offer new price pledge and fuel profit cap to woo CMA

Date : 19 March 2019

A £1bn investment in price and a cap on fuel profits are part of a package of measures unveiled by the two grocers in final representations to the Competition and Markets Authority ahead of the publication of its final report into their proposed merger.

New commitments to boost merits of deal

The two retailers have made a number of commitments to address concerns raised by the regulator in its provisional findings:

  • Prices would be £1bn lower by the third year after the merger completes. £300m of this would be invested in the first year and the remainder over the following two years as cost savings flow through
  • Sainsbury's would cap its fuel gross profit margin at no more than 3.5 pence per litre for five years. Asda will guarantee its existing price strategy
  • Price commitments would be reviewed independently by a third party and the two retailers will publish performance data each year, holding them to account
  • Sainsbury's would move to pay small suppliers (turnover of <£250k) within 14 days. Asda will continue to pay small suppliers within 14 days in line with existing commitments

Challenges to report findings

Sainsbury's and Asda have also formally set out their criticisms of the CMA's provisional findings. The two retailers said the report contained significant errors, and that these were compounded by the CMA's choice of an unexpectedly low threshold for competition concerns. In a detailed response Sainsbury's and Asda have sought to address 'these economic and legal errors'.

The two retailers have also responded to the Notice of Proposed Remedies by outlining supermarket and petrol forecourt divestments across both brands to satisfy concerns regarding any substantial lessening of competition as a result of the merger.

 

Sainsbury's Chief Executive, Mike Coupe and Asda Chief Executive, Roger Burnley said:

"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 are committing to reducing prices by £1 billion per year by the third year which would reduce prices by around 10% on everyday items. We are happy to be held to account for delivering on this commitment and to have our performance independently reviewed and to publish this annually.

"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."

 

For more detail on the merger visit: Sainsbury's and Asda: a merger proposal

The CMA will publish its final report into the merger by April 30th.

 

IGD Sainsbury's Trade Briefing 2019

27 June, London

Hear from Group CEO, Mike Coupe and the Sainsbury's and Sainsbury's Argos leadership teams, who will provide a business and commercial update on ‘Destination Sainsbury’s’.

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