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      Deal breaker: Sainsbury’s and Asda’s merger

      29 April 2019 by

      black and white image of merging train tracks
      black and white image of merging train tracks

      Approximately one year ago, Sainsbury’s announced its intention to take over its rival supermarket Asda; in a merger deal which promised cuts of £1bn. However, on 25 April 2019 the Competition and Markets Authority (“CMA”) decided to block the merger due to the potential harm to consumers and competition.

      Market shares

      Sainsbury’s is a public limited company with shares listed on the London Stock Exchange. Sainsbury’s is the third largest chain of supermarkets in the UK, following Tesco and Asda respectively. Walmart (an American Parent company) currently owns Asda. Asda and Sainsbury’s are currently second and third within their market. The CMA concluded the combined power, and collective market-share, of Sainsbury’s and Asda could have formed the UK’s largest supermarket.

      Merger and CMA decision

      The two supermarkets argued that some of the benefits of the merger were lower costs for both companies; and therefore lower costs for the consumers across the UK. Sainsbury’s also argued that the merger would help counteract the rapid growth of Aldi and Lidl within the UK.

      However, the CMA found that despite Sainsbury’s statements, the likely effect of the merger was that it would create a retail giant in the UK market; and would also affect competition for the other smaller UK grocers. Another effect would have been that the prices for consumers would have risen rather than fallen, whilst limiting consumers’ choices.

      The Chair of the CMA’s inquiry group suggested that the merger ‘would reduce competition in supermarkets and online grocery shopping and at the companies’ petrol stations. We think that is likely to lead to higher prices or other changes which would be unwelcome to shoppers, such as longer checkout queues’.

      Competition in the UK

      Competition law can be exercised in a number of ways. A merger deal (as proposed by Sainsbury’s and Asda), a distribution agreement, a franchise agreement and via various other methods. Either way, the CMA is the UK authority body responsible for implementing and upholding competition law in the UK.

      It is very important that you comply with the competition law rules as failure to do so has potentially-serious adverse consequences to you (if you are director if the company) and/or the company itself. For general guidance in relation to competition law and distribution agreements please refer to our previous blog on this topic (available at https://www.fjg.co.uk/blog/2019/02/25/distribution-agreements-compliance-with-competition-law-and-consequences).

      The Corporate Commercial Department here at Fisher Jones Greenwood LLP can certainly assist you with the preparation and/or of any distribution and/or franchise agreements to ensure compliance with competition law rules; as well as assist you and guide you through an acquisition, merger or other types of commercial transactions.

      Should you require any information or assistance do not hesitate to get in touch. Please call 01206 700113 or email [email protected].

      Source: BBC News

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      We are welcoming clients back to our offices

      Differing tiers and three lockdowns later, Fisher Jones Greenwood Solicitors are now pleased to be able to welcome clients safely back to our offices.

      Remote working and the digitalisation of the way we work, have been key to keeping FJG and the rest of the country going.

      • We are now able to offer, pre-booked face-to-face appointments. Although, we are still able to offer remote appointments if preferred.
      • You can continue to visit our offices at any time to post any correspondence and documents through letterboxes.

      If you are visiting an FJG office, covid-19 safety rules of social distancing, hand sanitization, and the wearing of masks will still apply.

      • Please be aware you will also need to have your temperature taken on arrival.
      • There will also be protective screens in place to protect you and our staff.

      Please do not hesitate to contact your legal adviser by email or by telephone should you have any worries or concerns. Alternatively, please call our main switchboard number (01206 835300), and a message to return your call will be relayed to the relevant person.

      Best wishes
      Paula Cameron
      Managing Partner