Sainsbury's and Asda, the nation's second and third biggest supermarket chains respectively, unveiled merger plans in April 2018 to create a retail king that would leapfrog United Kingdom number one Tesco.
J Sainsbury PLC (LON:SBRY) and Wal-Mart Inc's (NYSE:WMT) Asda have promised to slash prices by £1bn each year as part of a series of proposed remedies to allay United Kingdom competition watchdog's concerns about their planned merger.
In February, the CMA threw a spanner in the works of the proposed "mega-merger" between two of Britain's biggest supermarkets, after they stated the deal would create a "substantial lessening of competition at both a national and local level", with potentially "a poorer overall shopping experience" for consumers.
The two groups said they would invest 300 million pounds in the first year after combining and a further 700 million over the following two years - reducing prices "by around 10 percent 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.
In their detailed response to the Provisional Findings, Sainsbury's and Asda have sought to address these economic and legal errors.
The supermarkets expect £1.6bn in cost savings to arise from increased purchasing power with suppliers, putting Argos stores into Asda, jointly buying shared goods and service and reducing central costs.
Sainsbury's also promised to cap its fuel gross profit margin to no more than 3.5p per litre for five years, while Asda will guarantee its existing fuel pricing strategy.
Sainsbury's boss Mike Coupe, who lashed out at the CMA following its findings last month, and Asda chief executive, Roger Burnley said: "We hope that the CMA will properly take account of the evidence we have presented and correct its errors". Analysts had previously expected the regulator to demand.
They also said they were prepared to divest some supermarkets and petrol forecourts across both brands to get the deal through but did not provide figures.
"For Sainsbury's to forge on - with what many see as an already lost battle - shows how pivotal Sainsbury's feels consolidation at the top end of the grocery market is in order to stop long-term share decline at the Big Four, to use economies of scale and pressure on large suppliers to reduce shelf prices for shoppers", Brereton said.
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