The CMA is expected to rule on a Sainsbury's/Asda merger in April © REUTERS - stock.adobe.com
The CMA is expected to rule on a Sainsbury's/Asda merger in April © REUTERS - stock.adobe.com

Sainsbury’s and Asda commit to prompt payment of suppliers

20 March 2019

The supermarket chains said small suppliers with a turnover of under £250,000 would be paid within 14 days as part of the proposed merger.

In a financial statement the supermarkets made a commitment to pay small suppliers promptly and lower prices for consumers.

They said: “Sainsbury's will move to pay small suppliers (turnover with the business of less than £250,000) within 14 days while Asda will continue to pay its small suppliers within 14 days, in line with existing commitments.”

As well as committing to prompt payment, the retailers disputed claims by the Competitions and Markets Authority (CMA) that downward pressure on pricing as a result of merger and subsequent procurement efficiencies would be only around 1%.

They said the provisional findings by the CMA on the proposed merger contained “significant errors” and the competition problems identified do not fit the facts and evidence in this case.

The supermarkets estimated that within three years of completion of the merger, the cost of everyday items would be reduced by around 10%, with £1bn worth of lower prices delivered annually to customers.

Cost savings would be created 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”, the supermarkets said.

The retailers also said cost savings would be accrued by jointly purchasing goods and services and reducing central costs.

When proposing the merger in 2018, Sainsbury’s and Asda said that procurement efficiencies were the main rationale, insisting that the move would not harm suppliers or hinder innovation.

In its provisional findings, the CMA found that suppliers were unlikely to raise their prices as a result of the proposed merger.

The CMA also said that while increased efficiencies would be likely to see slight price reductions on groceries and clothing, electricals and toys, the merger could see fuel prices rise at a large number of petrol stations.

In response the supermarkets said the amount of profit made on petrol would be capped.

The CMA is due to publish its final report and decision on whether the merger can go ahead on 30 April 2019.

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