Sainsbury and Asda Merger

Rebecca Long Bailey Excerpts

Monday 30th April 2018 Commons Chamber

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy if he will make a statement on the proposed merger of Sainsbury’s and Asda.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Andrew Griffiths)]

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 Competitions 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 will decide 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.

[Official Report, 2 May 2018, Vol. 640, c. 4MC.]Today, the Secretary of State and I have spoken to Sainsbury’s chief executive officer Mike Coupe, and Asda CEO Sean Clarke, so that we can better understand their plans. Additionally, I have today spoken to the Union of Shop, Distributive and Allied Workers and Unite unions, and 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.

[Rebecca Long Bailey]

The landscape for retailers has become increasingly difficult over recent years, and I am sure that the Minister shares my concerns regarding this deal, given its potential to squeeze competition in the market and the risks that it poses to workers, suppliers and consumers. He confirmed that there will be no store closures, but will he also confirm that there will be no job losses, no changes to pay, terms and conditions, and no closure of any sites within each company’s estates portfolio—distribution sites and offices, for example? If so, for how long will that promise be effective, and will he seek legally binding assurances?

It is clear that a duopoly of the big supermarkets—Tesco, and Asda and Sainsbury’s—will now emerge providing never-before-seen bargaining power. Indeed, the statement this morning included a promise to bring prices down for consumers, but it is feared that that will be at the expense of suppliers, farmers and manufacturers whose prices and terms will be driven down, pushing many to the edge of collapse. Can the Minister confirm that that will not be the case? In addition, does he agree that control of 60% of the market by the duopoly may pose a risk to consumer choice and provide less incentive to entice with good offers? If so, what assurances has he received in that regard? I am sure that he agrees that an urgent CMA investigation is imperative, but can he confirm that the CMA will prevent the integration of the companies during investigation, as it is entitled to do?

The Minister will agree that many of the risks associated with this deal do not bear directly on the CMA’s remit of testing whether there would be a substantial lessening of competition. As he said, he has no power to intervene directly in the merger as it does not meet the public interest tests of national security, media plurality and financial stability. Given that the deal could radically alter the whole grocery sector—from farm and factory to supermarket shelf—will he finally use his powers to broaden the scope of the public interest test to include deals of such economic and national significance, as he has been repeatedly asked to do?

[Andrew Griffiths]

I thank the hon. Lady for her important points. I share many of the concerns that she voices, but she says that the CMA’s remit does not extend to the substantial lessening of competition—[Interruption.] That is exactly what the CMA does. Its role is to examine competition matters—[Interruption.] If I misheard the hon. Lady, I apologise.

The CMA’s role is to consider the impact of this merger on not just competition in the marketplace, but suppliers. The hon. Lady rightly raised the impact that the merger could have on farmers and suppliers, and that was why the Secretary of State and I reiterated to Asda and Sainsbury’s when we spoke to them this morning the importance of their engaging with not just the CMA, but bodies such as the National Farmers Union and other unions to ensure that this is a proper process that we understand. The hon. Lady will know that section 172 of the Companies Act 2006 puts a duty on directors of the new company to have regard to the impact that their decisions would have on their suppliers, and we will be monitoring that very closely in the months to come.

We must also recognise, as the hon. Lady said at the very beginning of her contribution, that the retail sector is in a huge state of flux. We must all understand that the way in which consumers purchase these days is changing dramatically. There has been a 9% increase in sales through online vehicles in the last 12 months alone. That, by necessity, means that the retail sector has to change and adapt. One of the things that the merger will offer is reduced costs for the consumer, which I hope she will welcome. We all want to protect consumers and make sure they are getting great value for money, and that is one of the things that the merger promises. I can assure her, from the discussions I have had with the CMA, the Groceries Code Adjudicator and both parties, that ensuring the supply chain is properly protected is one of the priorities and something that I guarantee we will keep a close eye on.