MPs intervene in Sainsbury's-Asda deal

The chairs of two parliamentary committees have intervened in Sainsbury’s £7.3bn takeover of Asda by asking the competition regulator to supply details of its investigation into the deal.

Rachel Reeves, who chairs the business committee, and Neil Parish, chair of the environment, food and rural affairs committee, wrote to David Currie, chairman of the Competition and Markets Authority, expressing concerns about the merger.

The MPs’ first concern was the impact on the grocery supply chain of a deal that would leave Sainsbury’s and Tesco dominating the grocery retail market. They also voiced misgivings about the effect on suppliers and consumer choice.

The CMA said shortly after the takeover was announced that an investigation was likely. Buying Asda from Walmart would give Sainsbury’s about 31% of the UK grocery market. The combined market share of Sainsbury’s and Tesco would be almost 60%.

Reeves and Parish asked Currie for details of:

• The timing and expected length of the CMA’s investigation
• What would influence a decision to move to a full “phase 2” inquiry
• Whether evidence would be sought from suppliers of grocery retailers
• How the CMA would make sure the combined company did not have local monopolies
• Tests to decide whether stores should be sold to rivals or other businesses

The committee chairs asked the CMA to reply by 17 May and said they would publish the response. They copied their letter to Andrew Tyrie, the former chair of the Treasury committee, who is about to take over as CMA chairman.

Reeves said: “This merger threatens customer choice, 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”.

The committees’ intervention raises the prospect of the takeover becoming a political matter. Parliamentary committees have taken a greater interest in business matters and have extracted concessions from bosses such as retail tycoon Philip Green over his sale of BHS and Melrose, which made binding pledges to secure its takeover of GKN.

The CMA takes preliminary evidence from the companies before a phase 1 review that lasts 40 days and then deciding whether to move to a phase 2 inquiry that lasts up to 24 weeks. Sainsbury’s has argued buying Asda will be good for consumers because prices will fall but the MPs are concerned about the impact on suppliers.

Parish said: “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.”