Sainsbury's-Asda merger blocked by regulator Watch

Andrew97
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#21
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(Original post by 3121)
Where did the number 60% come from? They were going to be forced to sell off a number of shops allowing room for other businesses to expand, there market share would’ve been close to Tesco’s. The regulator could’ve easily prevented your concern by limiting their market power.

If it was only the apple going up I don’t think that’s enough to justify blocking the merger, if I was going to spend significantly more on my weekly shop then yes I’d shop elsewhere. I’ve yet to find a town that has a Sainsbury’s or Asda but no Tesco, I’ve come across many with a Tesco and no Sainsbury’s or Asda but I don’t see the regulators doing anything about it.

I remember going to a town with a 2 Tesco’s and no nearby competitors. But the prices seemed fair and the same as prices near me

Your points are valid but these are points the regulators could’ve easily addressed and ASDA/Sainsbury’s already did. The sell off of stores was a brilliant opportunity for smaller businesses especially the petrol stations.
Where I live there is a Sainsbury and ASDA next door to one another. Although we also have an: Iceland, Morrison’s, Aldi, Tesco and M&S in some form within a mile radius.
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marinade
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Surprised it didn't go through, I worked for sainsbury's when pharmacy was sold off and there was a CMA investigation which was basically a pretty flimsy and more opaque than it should be process. I have kept a close eye on investigations the predecessor to the CMA did and they tend to get rubber stamped.

I don't think asda and sainsbury's merger is good, just expected it'd go through with selling off stores.

Difficult choices though, the number of retail jobs and hours are declining.
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3121
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(Original post by Themysticalegg)
The 60% market share comes from the concern that Asda-Sainsbury's + Tesco = 60% and there could be less incentive to cut costs due to less competition. As you said if an area only had a Sainsbury's + Asda + Tesco and one of these decided to raise prices, the other could potentially follow through with minimal repercussions. As some people may have poor public transport links, don't own a car, do not feel the cost of going to a Lidl/Aldi/Morrisons or any other viable alternative is worth it. That being said the opposite could of happened too with bigger economies of scale from the merger forcing suppliers to lower their prices. The only issue is wouldn't selling shops just increase unemployment as there's no need for a Sainsbury's and Asda in the same town/city for example? Although I can see the opportunity for smaller businesses willing to take the petrol stations.
The merger would give them little extra market share compared to Tesco but after selling off the extra stores I think it would be on par if not less. Tesco has had an unfair advantage for a very long time, it’s been caught abusing its monopsony and monopoly powers many times, either Tesco should be more regulated or a similar size company be allowed to fairly compete (the merger of ASDA+Sainsbury’s). As for unemployment, that’s a fair point but if they’re being forced to sell off it’ll likely be because it’s in close proximity of another Asda/Sainsbury’s so I’d assume Tesco, Waitrose, Morrison’s, etc would be eager to get their hands on it or even costcutter/Londis as it’d likely be undervalued

But you seem to be forgetting the bigger picture, online shopping and amazon expanding pantry and prime now are a huge threat to UK supermarkets and amazons main advantage comes from its logistical set up. The lack of need for store fronts in high cost retail areas, combined distribution centres, etc. Once Sainsbury’s and Asda merged the savings that could’ve been made from combing the distribution and combing logistics would be substantial, it could’ve easily given an estimate and the regulators could’ve said under current prices they expect £x of savings to be passed directly on to consumers, Asda & Sainsbury’s already promised this but having it jk writing would’ve been better.

These companies are above local competition, I don’t think they participate in it these days. It’s not worth the data handling, there is regional competition though but it usually reflects an areas living costs and wealth e.g London is more overpriced.

Supermarkets know they have to be cautious when it comes to pricing as the competitors follow quickly not only that but if A-S decided to increase milk by 10p and Tesco followed, guess what? Amazon can begin selling its milk 10p cheaper without making a loss, what a great entry. The main barrier to entry is logistics so any price war and you can bet amazon will be waiting to take advantage, its only a matter of time.

Also the CMAs research was disgraceful. It didn’t reflect consumer habits at all, they researched what they wanted to and not what they needed to. It was ridiculous, they basically feared A-S having the same power as Tesco? Tesco doesn’t have a huge monopoly power but it’s power over suppliers is incredible and the likes of Sainsbury’s, Asda, Waitrose and Morrison’s have to pick up on this as suppliers need to compensate somewhere, Tesco has always been getting the better deals on supplies and rarely passes it on to consumers unless it sees its competitors doing so too.
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3121
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(Original post by Andrew97)
Where I live there is a Sainsbury and ASDA next door to one another. Although we also have an: Iceland, Morrison’s, Aldi, Tesco and M&S in some form within a mile radius.
Right… it’s almost unheard of to have a Sainsbury’s or Asda by itself unless it’s out of the town centre (in which case the time/distance to drive to it could probably take you to another supermarket) now I could list you a number of towns that only have a Tesco yet no Asda, no Sainsbury’s, no Aldi, no Morrison’s, no M&S and no Iceland within a multi-mile radius
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Themysticalegg
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#25
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(Original post by 3121)
The merger would give them little extra market share compared to Tesco but after selling off the extra stores I think it would be on par if not less. Tesco has had an unfair advantage for a very long time, it’s been caught abusing its monopsony and monopoly powers many times, either Tesco should be more regulated or a similar size company be allowed to fairly compete (the merger of ASDA+Sainsbury’s). As for unemployment, that’s a fair point but if they’re being forced to sell off it’ll likely be because it’s in close proximity of another Asda/Sainsbury’s so I’d assume Tesco, Waitrose, Morrison’s, etc would be eager to get their hands on it or even costcutter/Londis as it’d likely be undervalued

But you seem to be forgetting the bigger picture, online shopping and amazon expanding pantry and prime now are a huge threat to UK supermarkets and amazons main advantage comes from its logistical set up. The lack of need for store fronts in high cost retail areas, combined distribution centres, etc. Once Sainsbury’s and Asda merged the savings that could’ve been made from combing the distribution and combing logistics would be substantial, it could’ve easily given an estimate and the regulators could’ve said under current prices they expect £x of savings to be passed directly on to consumers, Asda & Sainsbury’s already promised this but having it jk writing would’ve been better.

These companies are above local competition, I don’t think they participate in it these days. It’s not worth the data handling, there is regional competition though but it usually reflects an areas living costs and wealth e.g London is more overpriced.

Supermarkets know they have to be cautious when it comes to pricing as the competitors follow quickly not only that but if A-S decided to increase milk by 10p and Tesco followed, guess what? Amazon can begin selling its milk 10p cheaper without making a loss, what a great entry. The main barrier to entry is logistics so any price war and you can bet amazon will be waiting to take advantage, its only a matter of time.

Also the CMAs research was disgraceful. It didn’t reflect consumer habits at all, they researched what they wanted to and not what they needed to. It was ridiculous, they basically feared A-S having the same power as Tesco? Tesco doesn’t have a huge monopoly power but it’s power over suppliers is incredible and the likes of Sainsbury’s, Asda, Waitrose and Morrison’s have to pick up on this as suppliers need to compensate somewhere, Tesco has always been getting the better deals on supplies and rarely passes it on to consumers unless it sees its competitors doing so too.
Yeah I agree the regulator's initial issue was definitely letting Tesco get to the size it has now and it should be curbed. I would rather see Tesco being forced to cut down and the Sainsbury's-Asda merger still blocked though. I would be interested to see the scenario just to find out how attractive these places are for prospective buyers. In my local town we have Waitrose, Lidl, Tesco, Sainsbury's in close proximity and Morrisons replaced Sainsbury's when they left. However they left within 3 months it was a catastrophic failure, Sainsbury's abandoned it for a reason. (Bear in mind my town has a population of 20,000 there was too many stores)

Very good point I agree Amazon is a massive risk with it's minimal overheads however it depends on the consumer behaviour of the current generation although yes online Amazon has all but wiped it's opponents out in retail. However, I would never wish to shop for groceries using Amazon Pantry I have a hands on approach to grocery shopping even if the difference was 10p per item but I am more fortunate than many others in the country who may feel differently. (Maybe I'm just old fashioned and the next generation will shop differently?) Amazon's power in the market is very scary though I hate to see the day where Amazon dominates every front including grocery shopping. I honestly couldn't believe it when Amazon Prime Now was released in London I was honestly shocked and impressed. I also agree that price changes are done on a national front rather than on a regional front bar London. I was surprised when I moved to Swansea that the prices were exactly the same price even though comparatively one is far wealthier than the other. The funny thing is as a buyer not in food, the amount of power I had working at a global (market leader) company compared to a multinational was shocking and I'm sure this power is replicated by Tesco which bullies it's suppliers into submission due to it's requirements in comparison to other shops. Just because my company could wipe out millions from this supplier if they didn't adjust their prices accordingly. (Which can make or break them)

Basically generally I agree and I found your Amazon thoughts very interesting!
Last edited by Themysticalegg; 2 weeks ago
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Drewski
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#26
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(Original post by 3121)
Right… it’s almost unheard of to have a Sainsbury’s or Asda by itself unless it’s out of the town centre (in which case the time/distance to drive to it could probably take you to another supermarket) now I could list you a number of towns that only have a Tesco yet no Asda, no Sainsbury’s, no Aldi, no Morrison’s, no M&S and no Iceland within a multi-mile radius
The issue is people only focusing on the supermarkets. You have to consider the convenience stores too.

Tesco and Sainsbury's both have smaller stores too. If these were removed from their footprint then we'd have a different and better situation with more local competition.
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3121
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(Original post by Drewski)
The issue is people only focusing on the supermarkets. You have to consider the convenience stores too.

Tesco and Sainsbury's both have smaller stores too. If these were removed from their footprint then we'd have a different and better situation with more local competition.
Absolutely, and the merger would mean the sale of many small stores at a brilliant value. The CMA could’ve set rules like they can’t profit from the sales, it can’t be sold to companies with x% market share and I’m sure Sainsbury’s and Asda would rather sell to smaller convenience stores like Londis, Costcutter or just pure local stores than to its competitors, I think this was part of it’s proposals. A new business could’ve easily been created and acquired all its property giving consumers more choice and introducing more competition.

The CMA didn’t act in the interest of small business and consumers in this case, and when non tax paying companies like amazon get a foot, the UK government will regret it.
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Jushine
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I don't think Sainsburys is as pricey as people make out maybe 5 years ago
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