Sainsbury’s has confirmed plans to merge with Walmart owned Asda.
A proposed merger between Sainsbury’s and Asda must not allow the supermarkets to ‘coerce’ small suppliers into accepting unfair terms.
That was the warning from the Federation of Small Businesses (FSB) following the confirmation Sainsbury’s had agreed terms on a proposed merger of Sainbury’s and Asda.
According to the latest figures from Kantar Worldpanel, Asda holds 15.6 per cent of the UK grocery market share with Sainsbury’s holding 15.8 per cent. The merger would give them a greater share than the UK’s biggest supermarket chain, Tesco.
Sainsbury’s said it expected to lower prices by around 10 per cent on ‘many of the products customers buy regularly’.
There were no planned Sainsbury’s or Asda store closures.
FSB national chairman Mike Cherry said: “A merger of this size will concentrate a lot of power in the hands of one giant company, and it is important that power is not misused to coerce small suppliers into accepting unfair contracts and poor payment terms.
“Those at the top of Sainsbury’s and Asda should explain how they plan to merge these two supply chains fairly, and give reassurance that cost savings won’t be achieved simply by milking their small suppliers for all they’re worth.
“When investigating this proposed merger, the Competition and Markets Authority (CMA) should be looking for cast-iron commitments that a positive standard will be set for working with smaller suppliers.”
On twitter, Liberal Democrat leader Sir Vince Cable called on the CMA to investigate and ‘force divestment if local dominance’.
“CMA under Andrew Tyrie must now get tough with monopolies after spineless inquiries on banking and energy companies,” he said.
Mike Coupe, chief executive of Sainsbury’s, said it was a ‘transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future’.
“It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy.
“Having worked at Asda before Sainsbury’s, I understand the culture and the businesses well and believe they are the best possible fit.
“This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together.”
Roger Burnley, chief executive of Asda, said it was ‘great news’ for customers, allowing them to deliver lower prices and greater choice.
“Asda will continue to be Asda, but by coming together with Sainsbury’s, supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive.
“From my six years with Asda and ten years with Sainsbury’s, I know first-hand that both organisations are fortunate to employ some of the most talented and customer-focused colleagues in this market and I am excited by the opportunity of the two coming together.”