Sainsbury’s and Asda have committed to deliver £1 billion of lower prices annually by the third year post-completion of their proposed merger.
The announcement is made in their response to the Notice of Proposed Remedies by the Competition and Markets Authority (CMA) which suggested the sale of a large number of stores, or even one of the brands, to proceed with the merger.
The watchdog said its provisional findings indicated “extensive competition concerns” leading to “higher prices, a poorer shopping experience, and reductions in the range and quality of products offered” in-store and online.
In an effort to salvage the deal, both supermarkets have announced supermarket and petrol forecourt divestments across both brands.
They promised a 10 percent reduction in prices of everyday items by investing £300 million in the first year of the combination and a further £700 million over the following two years. They agreed to submit the price commitments to an independent review.
Sainsbury’s will 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.
Sainsburys said it will move to pay small suppliers (turnover with the business of <£250,000) within 14 days. Asda will continue to pay its small suppliers within 14 days, in line with existing commitments.
“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,” said Mike Coupe, chief executive of Sainsbury’s and Roger Burnley, his Asda counterpart, in a joint statement.