Sainsbury’s and Asda claim merger to deliver £1bn price cuts

Sainsbury’s and Asda have claimed that their proposed merger would result in £1bn of price cuts annually if the deal was to go ahead.

This announcement is in response to the competition watchdog CMA finding “extensive competition concerns” in the Asda-Sainsbury’s multi-billion pound merger. Last month, the CMA’s provisional report said that these concerns can only be addressed by either blocking the deal or requiring the supermarkets to sell stores.

Sainsbury’s and Leeds-headquartered Asda have now come forward to say they “strongly disagree” with the CMA’s findings, as the analysis contains “significant errors.”

In an official response to the CMA, Sainsbury’s and Asda said that the merger would deliver £1bn of lower prices annually by the third year, which would reduce prices by around 10% on everyday items.

Sainsbury’s also vowed to cap its fuel gross profit margin to 3.5 pence per litre for five years; whilst Asda has guaranteed its existing fuel pricing strategy.

The two supermarkets went on to claim the proposed merger will create cost savings in three ways. Firstly 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; by putting Argos stores into Asda; and 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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