If Mike Coupe and Roger Burnley thought their proposed mega-merger’s only obstacle was the CMA, MPs are at least having a go at being a thorn in their side too.
Yesterday came the news the two bosses are to be hauled before the Environment, Food and Rural Affairs (Efra) Committee next week to justify the merger and explain fears on both sides of the house over the impact on suppliers.
Along with that fascinating prospect came the announcement that the committee is investigating ways to expand the role of Groceries Code Adjudicator Christine Tacon. She may be given new powers to stop the merged giant putting the squeeze on suppliers, even if the CMA gives the deal the thumbs up.
This comes just weeks after Tacon herself told MPs she was powerless to intervene in the issue because pricing was beyond her remit.
The fact that MPs now want that remit extended (again) is good news for the likes of the NFU and supplier leaders. They have already been raising concerns with the CMA behind the scenes about the huge power the merged company would hold over suppliers, not to mention the prospect of two companies (Tesco being the other) controlling more than 60% of the market.
This week The Grocer spoke to senior supplier sources who say they believe Tacon’s office is “seriously under-resourced” and “tinkering around the edges”. As for the Sainsbury’s-Asda deal, it is merely a spectator, they say.
But MPs and suppliers still clinging on to the idea the Adjudicator is going to be able to stop the merger in its tracks may have to get real.
For a start, calling on environment secretary Michael Gove to expand Tacon’s role ignores the fact that the Adjudicator comes chiefly under the remit of another department, BEIS.
Even allowing for Gove’s considerable sway in government, it is also just four months since ministers decided against extending Tacon’s powers to cover primary producers, with business minister Andrew Griffiths and Defra minister George Eustice saying the move could not be justified. Instead they unveiled what they claimed was a comprehensive package of measures to help farmers in these tough, competitive times.
Ministers have spent years banding around empty pledges of extending the Adjudicator’s role, but in reality senior sources are adamant it would be a “massive change of scope” and a “departure too far” for her to be asked to intervene on issues of pricing. The CMA, and ultimately the Adjudicator’s role itself, was set up to protect consumers from harm, not suppliers, they point out.
How would it sit with those who created the role if Tacon found herself in effect forcing companies to keep prices up, and to fund the system while they were at it?
The timeframe is also ridiculously unrealistic. Extending the Adjudicator’s powers would surely involve a new CMA inquiry and subsequent regulation, which could take years. Is the CMA to ask Sainsbury’s and Asda to kindly put their plans on hold for a few years, while Amazon, Ocado and the rest loom large in their wing mirrors?
Even if ministers did decide to extend the role, how would legislation be drafted to allow the Adjudicator to stop Sainsbury’s and Asda making commercial decisions about who they do business with and how they negotiate better prices?
Suppliers might not like it, but ultimately if retailers want to go with a rival who offers cheaper prices, then that is the way the cookie crumbles – as long as they don’t abuse the rules over how they go about it.
What is more likely is that this latest call by MPs could end in the worst of all fudges.
The Adjudicator could easily find herself charged with a vague job of policing Sainsbury’s and Asda, with no real powers to do so. MPs would be able to say they had done their bit, and could dodge any responsibility for the suppliers’ plight.
Undoubtedly next Wednesday’s duel between MPs, Coupe and Burnley will be must-see viewing, though it’s unlikely the Sainsbury’s boss will be providing the warm-up act this time.
But don’t be surprised if what it demonstrates most, once again, is the disconnect between those in the industry and those in the corridors of power, who know little about the practical reality of what actually goes on in the front line, still less about how to do anything to change it.