LONDON (Reuters Breakingviews) - J Sainsbury’s 7.3 billion pound bid for Asda shows the need for new antitrust thinking. The grocer wants Britain’s Competition and Markets Authority (CMA) to vet retail mergers in a new way. The rise of discount rivals and online shopping means it has a point. A revamp of the metrics used to ensure that shoppers have enough choice is inevitable.
The retail sector has been upended since the UK competition authorities sized up WM Morrison’s 2004 purchase of Safeway. As a result, their approach to mega-deals is increasingly anachronistic. For example, the traditional focus has been on the four biggest British grocers. Yet, since the Safeway deal, German discounters Aldi and Lidl have snatched a combined 13 percent stake of the food market, Kantar Worldpanel data shows. There’s a good case to include these companies in the roster of rivals when weighing up whether there is enough competition in the British grocery market.
Consumers’ shopping habits have also changed. More than 5 percent of food purchases are now made online, which warrants taking into account the likes of Amazon and Ocado. That means old measures, such as the time it would take a shopper to drive to an alternative one-stop store in an urban area, may be less dependable when trying to decide whether a merger leaves consumers with enough choice.
The CMA could still be concerned by the prospect that the country’s four largest grocers will have a 75 percent market share, as was the case a decade ago. But major supermarkets, such as Tesco and Sainsbury’s, are unlikely to regain their ability to hike prices. The financial crisis made consumers more willing to shop around. The average Briton’s grocery budget is now spread over 26 separate shopping trips per month and across numerous supermarkets, according to IGD ShopperVista. More than half shop for food at five or more different stores each month.
Sainsbury’s may struggle to deliver all the synergies it has outlined if the CMA forces it to sell off too many stores. The more inclined the competition authorities are to update their approach to retail M&A, the better the grocer’s chance of acquiring Asda and then making a success of the deal.
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