The Social Market Foundation (SMF) welcomes the tough line taken by the Competition and Markets Authority (CMA) on the proposed merger of Asda and Sainsbury’s.
As SMF research last year highlighted, a merger of the two supermarkets would leave the UK groceries sector highly concentrated in the hands on a small number of large supermarkets – more so than ever before SMF research shows that when markets become more concentrated and less competitive, customer service often deteriorates, as do levels of consumer trust.
Given this, we agree with the CMA’s view that an Asda-Sainsbury’s merger could lead to a “poorer shopping experience”. The recent supermarket price war triggered by the rise of Aldi and Lidl demonstrates clearly the case for having more supermarkets competing with each other, not less.
Responding to the CMA’s announcement, Scott Corfe, Chief Economist at the Social Market Foundation, said:
“Our research has shown that reducing competition leads to worse outcomes for UK consumers – whether that be in the form of higher prices, reduced customer service or more limited choice. We welcome the CMA taking a tough line on the proposed merger, and highlighting the risks that it poses to UK consumers”
“Competition in markets is the key to prosperity. Rather than allowing supermarkets to merge themselves out of trouble, by bullying suppliers such as farmers to lower prices, we should be forcing these firms to try harder. They should be innovating, rather than merging, their way out of their current troubles”.