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Sainsbury's and Asda to deliver £1 billion in price cuts if merger goes ahead

Sainsbury’s and Asda have pledged to deliver £1 billion worth of price cuts if their merger gets the go-ahead.

FOOD & DRINK

Sainsbury's and Asda to deliver £1 billion in price cuts if merger goes ahead

Sainsbury’s and Asda have pledged to deliver £1 billion worth of price cuts if their merger gets the go-ahead.

Sainsbury's will also cap its fuel gross profit margin to no more than 3.5 pence per litre for five years and Asda will guarantee its existing fuel pricing strategy.

The move follows publication of provisional findings from the Competition and Markets Authority in which the organisation said the merger could lead to an increase in prices, a poorer shopping experience and a reduction in the range and quality of products offered. It also requested responses from the two parties.

In statement Sainsbury’s and Asda said: “Sainsbury's and Asda strongly disagree with the CMA's provisional findings and have found the CMA's analysis of their proposed merger to contain significant errors.

“This is compounded by the CMA's choice of a threshold for identifying competition problems that does not fit the facts and evidence in the case and that is set at an unprecedentedly low level, therefore generating an unreasonably high number of areas of concern. In their detailed response to the provisional findings, Sainsbury's and Asda have sought to address these economic and legal errors.”

The two companies said the merged businesses will deliver £1 billion of lower prices annually by the third year following completion of the merger and that prices will be reduced by around 10% on everyday items. The price cuts will be funded by £1.6 billion worth of cost savings.

In addition, Sainsbury's will move to pay small suppliers with turnovers of less than £250,000 within 14 days while Asda will continue to pay its small suppliers within its current 14 day timeframe.

Sainsbury's chief executive, Mike Coupe and Asda chief executive, Roger Burnley said: "We are trying to bring our businesses together so that we can help millions of customers make significant savings on their shopping and their fuel costs, two of their biggest regular outgoings.

"We are committing to reducing prices by £1 billion per year by the third year which would reduce prices by around 10% on everyday items. We are happy to be held to account for delivering on this commitment and to have our performance independently reviewed and to publish this annually. 

"We hope that the CMA will properly take account of the evidence we have presented and correct its errors. We have proposed a reasonable yet conservative remedy package and hope the CMA considers this so that we can deliver the cost savings for customers."

The CMA is expected to publish its final report on 30 April.

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