MPs have written to the CMA demanding to know if the threat to suppliers will be taken into account in its probe into the proposed merger between Asda and Sainsbury’s.
The EFRA and BEIS committees have today written a joint letter to the authority, raising concerns about the impact the merger will have on the grocery supply chain and the market dominance it would give the newly merged business and Tesco.
It comes after Neil Parish, chair of the EFRA Committee, expressed fears yesterday that suppliers could be “stitched up” by the deal, with Sainsbury’s CEO Mike Coupe having already said he wants to secure price cuts from the retailers’ top 100 suppliers.
The MPs have asked the CMA to respond by 17 May to its questions, which ask for detail on the scope of the CMA’s investigation “including whether evidence will be sought from suppliers to grocery retailers”.
It has also asked for “criteria to be used for determining an acceptable degree of distance between stores belonging to the new merged company and of avoiding local monopolies”, as well as “the tests that will be used to determine whether any required divestment of stores should be to competitors or other businesses”.
Parish said: “Grocery retailers don’t have a gleaming record of treating suppliers well and the Grocery Code Adjudicator’s 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.”
Rachel Reeves, chair of the BEIS committee, added: “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.”