Proposed Merger of Sainsbury’s and Asda

Lord Henley Excerpts

Tuesday 1st May 2018 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, with the leave of the House I should like to repeat in the form of a Statement an Answer to an Urgent Question given in another place yesterday by my honourable friend the Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy. The Statement is as follows:

“On 30 April, J Sainsbury plc and Walmart Inc announced that they had agreed terms in relation to a proposed combination of Sainsbury’s and Asda Group Ltd, a wholly owned subsidiary of Walmart, to create an enlarged business. There are no planned Sainsbury’s or Asda store closures as a result of the merger. The proposed deal is conditional on clearance by the Competition and Markets Authority.

The Competition and Markets Authority will hold pre-notification discussions with the parties and, when it has sufficient information, will commence its phase 1 investigation. Usually, a phase 1 investigation will last up to 40 working days before the authority decides whether to clear the merger or refer it on to a detailed phase 2 investigation. I understand that the parties have requested to fast-track straight to phase 2. As part of its competition inquiry, the CMA can look at the buying power of a merged company in relation to its suppliers and the impact that the merger would have on them. Decisions about mergers are taken independently of ministerial control and are subject to legal challenge. Under the Enterprise Act 2002, Ministers have the power to intervene in mergers only on public interest grounds covering national security, media plurality and financial stability.

Today the Secretary of State and I have spoken to Sainsbury’s chief executive officer, Mike Coupe, and Asda’s CEO, Roger Burnley, so that we can better understand their plans. Additionally, I have today spoken to the Union of Shop, Distributive and Allied Workers and the Unite union. I will speak to the GMB union immediately after leaving here. When I spoke to Len McCluskey this morning, I made it clear that I expect Sainsbury’s and Asda to conduct proper and thorough engagement with the unions. This afternoon, I have spoken to the Groceries Code Adjudicator, Christine Tacon, to reiterate the importance of ensuring that suppliers, particularly small and medium-sized enterprises, are treated fairly.

The UK’s merger regime is designed to offer clarity for businesses and to build investor confidence. Mergers are an important part of a dynamic economy, and the Government appreciate that they can bring real benefits to consumers and the economy as a whole by attracting inward investment. We will continue to monitor the situation closely”.

My Lords, that concludes the Statement.

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[Lord Henley]

My Lords, the noble Lord’s first question was about semantics, whether this is a merger or a takeover. It is a merger, but I do not think we need bother about that. Secondly. he asked whether it will squeeze competition. I do not think it will. We are looking for benefits to consumers, but that is a matter for the CMA, and I am confident that the CMA, a body set up by the last Labour Government, has the ability and resources to do that job. Lastly, he asked about working with the Small Business Commissioner. The Statement makes it quite clear that my honourable friend had already spoken to the Groceries Code Adjudicator. If it is appropriate that he talks to the Small Business Commissioner, no doubt he will. I will pass that on to my honourable friend and ask him whether he has.

[Lord Fox (LD)]

Asda and Sainsbury’s both say their HQs will stay, no shops will close or be rebranded and jobs are safe, yet they promise price reductions of up to 10%. That can happen only through exerting their mass to squeeze the supply chain. We have talked about the role of the CMA, but what guarantees will the Government give the British food industry? What guarantees can British farmers expect from the Government?

[Lord Henley]

My Lords, we hoped that the first matter that noble Lords would want to address was savings for the consumer, and that is something that the supermarkets are looking for. The noble Lord said that they have stated that their headquarters will stay and all their stores will stay, and therefore savings can come only through squeezing the supply chain. I do not accept that, but that is a matter for the supermarkets to address. It is something that the CMA will look at when it addresses this matter properly, as was discussed when my honourable friend made his Statement yesterday in another place. Obviously, the CMA might want to look at individual stores and whether it is right and proper that some are kept. That is a matter for the CMA. As I have made clear, my honourable friend has already had discussions with the Groceries Codes Adjudicator and, to the extent that we can play a part in that, my honourable friend will continue to do so.

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend give the House an assurance that small growers of fruits and vegetables in particular will not be severely disadvantaged in this regard? There is real concern that when the Grocery Code Adjudicator’s powers were reviewed the opportunity was not taken to permit her to take up an investigation on her own initiative. I am sure my noble friend will agree that we all appreciate that there is no way that a small grower or farmer who has a contract with Sainsbury’s or Asda, or the bigger merged body, will put that contract at risk. It is very difficult to make a confidential complaint because they will be so easily identified and they will lose their part in the supply chain. Will my noble friend take this opportunity to review the powers of the Grocery Code Adjudicator to take up investigations on her own initiative if there is any proof at all, and will she be able to receive evidence in this regard from third parties such as any farm organisations like the NFU, the TFA or the CLA?

--- Later in debate ---

[Lord Henley]

My Lords, I note what my noble friend has to say. I do not want to rehearse all the arguments that we went through when the Grocery Code Adjudicator was established some years ago, but I accept that it is a very difficult question when we are dealing with the imbalance between the very big supermarkets on the one hand and, on the other, those further down the supply chain, particularly small producers and growers. However, I give an assurance to my noble friend that the powers of the Grocery Code Adjudicator will always be kept under consideration by my right honourable and honourable friends and by the department as a whole. Obviously we want to see fairness between the supermarkets and their suppliers, just as—this is equally important in all retail matters—we think it important to ensure that the interests of the consumer are kept first and foremost at hand. It is the consumer that we are most interested in.

[Lord Haskel (Lab)]

My Lords, we are still members of the single market. Is this a matter large enough to involve the Commission?

[Lord Henley]

No, my Lords, on this occasion the CMA will be doing this job. I think we can all say—even the noble Lord might agree—that, thankfully, the Commission will not be involved in any way at all.

[Lord Palmer (CB)]

My Lords, I have been involved in the food industry all my working life. Is this not in a way the thin end of the wedge? We already have completely deserted high streets. Are we shortly going to have completely deserted out-of-town shopping centres?

[Lord Henley]

My Lords, I am aware of the noble Lord’s involvement in the food industry. We have been eating biscuits bearing his name for some time, except I am not sure if we do eat those biscuits any more. The noble Lord will be aware that the retail world is changing, because that is what consumers require. It is not in our power to stop those changes; we must live with them. The retail sector itself must look at how the high street is changing and adapt accordingly.