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Sainsbury’s and Asda promise £1bn of lower prices if merger goes ahead

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19/03/2019
Sainsbury’s and Asda have pledged to deliver £1bn of grocery savings to consumers if the merger is given the go ahead by the competition watchdog.

The two supermarkets announced their savings commitment in a statement today while responding to concerns from the Competition and Markets Authority (CMA).

The CMA said a merger could push up food and fuel prices and lead to a “worse experience” for shoppers in-store and online.

Sainsbury’s and Asda said they “strongly disagree” with the CMA’s findings, adding its analysis of the proposed merger contained “significant errors”.

The retailers said if the deal was given the green light, they would deliver £1bn of lower prices annually by the third year post-completion.

Sainsbury’s said it would cap its fuel gross profit margin to no more than 3.5p per litre for five years, while Asda will guarantee its existing fuel pricing strategy.

The two business are proposing to merge so they “can lower prices for customers in an increasingly competitive market, while improving quality and service”.

They said they would create cost savings in three ways:

  1. By securing lower purchasing prices from suppliers, predominantly by paying the lower of the two prices that Sainsbury’s and Asda currently pay large suppliers for identical products
  2. By putting Argos stores into Asda
  3. By jointly buying shared goods and services and reducing central costs

Sainsbury’s chief executive, Mike Coupe and Asda chief executive, Roger Burnley said: “We are trying to bring our businesses together so that we can help millions of customers make significant savings on their shopping and their fuel costs, two of their biggest regular outgoings.

“We are committing to reducing prices by £1bn per year by the third year which would reduce prices by around 10% on everyday items. We are happy to be held to account for delivering on this commitment and to have our performance independently reviewed and to publish this annually.

“We hope that the CMA will properly take account of the evidence we have presented and correct its errors. We have proposed a reasonable yet conservative remedy package and hope the CMA considers this so that we can deliver the cost savings for customers.”

 

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