Sainsbury’s and Asda vow £1bn merger price cuts

Sainsbury’s and Asda say their planned merger will save them £1.6bn and allow them to pass on £1bn in price cuts to savers.

It says it will invite an independent body to check this promise in public.

Sainsbury’s also says it will cap the amount of profit it makes on petrol.

The supermarket giants are battling to convince the Competition and Markets Authority (CMA) to allow them to merge, a move that would see them leapfrog Tesco to become the UK’s biggest chain.

The CMA said last month it could block the merger between Sainsbury’s, the UK’s second-biggest supermarket chain and Asda the third biggest, currently owned by US giant Walmart.

The CMA says such a move would result in higher prices and less choice.

The CMA said that if it did allow the merger to proceed, it could force the sale of a large number of stores or even one of the brand names.

On Tuesday, Sainsbury’s and Asda’s joint statement said the CMA’s provisional findings contained “significant errors”.

In a robust statement, it criticised the CMA’s threshold at which concerns were triggered. It said this was set at an “unprecedentedly low level”, which, therefore, generated an unreasonably high number of areas of concern.

Sainsbury’s and Asda’s statement made a number of commitments:

• To deliver £1bn of lower prices annually by the third year following completion of the merger. To invest £300m in the first year of the merger and a further £700m over the following two years, as the cost savings flow through. This would reduce prices by around 10% on everyday items.
• Sainsbury’s will cap its fuel gross profit margin to no more than 3.5p per litre for five years; Asda will guarantee its existing fuel pricing strategy.
• The price commitments will be independently reviewed by a third party and the parties will publish the performance each year, holding them to public account
• Sainsbury’s will move to pay small suppliers (turnover with the business of less than £250,000) within 14 days; Asda will continue to pay its small suppliers within 14 days, in line with existing commitments

The CMA’s final decision is due on 30 April.