In Sainsbury's, Asda merger assessment, CMA must look to the future
18 June 2018. By Victoria Ibitoye.
J Sainsbury’s merger with Asda must be considered in light of the rapidly evolving retail climate. But with little industry consensus on what that looks like, the UK’s competition watchdog will have to draw its own conclusions on the deal's possible threats to the supermarket sector.
The Competition and Markets Authority will need to determine whether Asda and Sainsbury’s are de facto close competitors, given their status as two of the "big four" supermarkets, or whether recent developments in the market — such as the growth of discount grocers and online shopping and the varying demographics of both retailers — provide a big enough competitive constraint.
The task in itself is far from straightforward, and reflects the delicate issues the CMA will have to weigh up in its probe of the deal.
The regulator's summary of industry comments submitted during its preliminary request for views, published today, highlighted a lack of consensus among respondents as to whether Sainsbury’s and Asda should be considered close competitors at all.
The CMA said that while some of the respondents — which included supermarket groups, wholesalers, suppliers and trade associations — felt Asda and Sainsbury were close rivals, others believed they were more distant competitors because of their differing demographics.
It added that one respondent perceived Asda as a “pricing maverick” in the sense that it plays a particularly disruptive competitive role in the market.
Respondents also noted that the dynamics of competition differed between grocers — with some distinguishing between established national players such as the big four — Tesco, Morrisons, Sainsbury’s and Asda — and discounters such as Aldi and Lidl, convenience stores and online operators such as Ocado and Amazon.
Some felt, the CMA said, that the grocers shifted strategy depending on their customer focus, geographic reach and product and service offering, while others challenged the suggestion that customers shop in a single store, noting that some customers view stores as complementary rather that alternative options.
The regulator added that some respondents had noted a shift in consumer shopping habits, with some noting that customers were moving away from a “big shop” to shopping “little and often.”
The CMA will have to draw its own conclusions while keeping pace with recent market developments. For example, price rises and the impact that the merger will have on suppliers will also have to be viewed in light of the rapidly consolidating industry and growth of Amazon.
The CMA will therefore not only have to consider the impact of the merger on the industry at present, but also the merger's impact on where the industry is heading — a unenviable task given the fact that the industry players themselves cannot reach an agreement.
MLex and our LexisNexis Legal & Professional group companies may contact you with details about our products, services and events.
You’ll be able to update your communication preferences any time by clicking here or via the unsubscribe link provided within our communications.