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On 30 April 2003, the UK’s Competition Commission inquiry on the Safeway bid received presentations from the major trade bidders, as well as other interested parties. The following summarizes the main thrust of the arguments presented by a selection of the speakers:

  • Morrisons: Sir Ken Morrison pointed out that a successful bid by his company would be the only way that it could hope to challenge the big three players in the UK, as its current rate of organic growth is not enough to mount a credible assault on their leadership. He stated, not without strong
    justification, that Morrisons had the best geographic fit with Safeway without harming local competition. “To this day we are loyal to our founding principle of low prices for everyone,” he commented, before adding, “if we
    get Safeway we will take on the big three.”

  • J. Sainsbury: Sir Peter Davis noted that the competitive landscape should not be based on price alone. Somewhat wistfully, he asserted that Tesco and Asda had built their success on global buying power and non-food product development and that a successful bid by either would create a “duopoly (that) would be very much against the interests of both customers and suppliers.” With respect to local competition, Sir Peter acknowledged that
    Sainsbury would be happy to divest stores as required. With regard to competition in general, he stated that Sainsbury offers greater choice in terms of groceries and that a successful Asda or Tesco bid would lead to increased price competition and reduced range and choice for shoppers, leading to a grocery sector similar to that found in Germany. Sainsbury, he added, would lead to both lower prices (a 4.7 percent reduction was mentioned) and more choice. He concluded by saying: “We feel a Sainsbury’s/Safeway merger is in the best interests of both consumers and suppliers. Ours is a serious offer, and it is the option which will underpin most effectively a balanced, competitive UK retail market.”

  • Tesco: Tesco’s approach was focused on price reductions and job creation. Sir Terry Leahy told the inquiry that a Tesco takeover would see Safeway’s prices fall by 11 percent and would create 5,000 net new jobs as Tesco improved Safeway’s efficiency and sales densities. There was also an element of Tesco wishing to spread its own brand of retail joy, with Sir Terry arguing that: “It would be perverse to deny a wider group of consumers the chance to have access to what Tesco has to offer for customers. It would send a signal that successful firms in a competitive market face a regulatory hurdle not shared by their rivals. This could chill the very competitive endeavor that competition policy exists to preserve and to encourage.” A successful Tesco bid would see more people, particularly the less affluent, have access to Tesco‚s affordable products, he added. Sir Terry concluded by noting that, “Uniquely, Tesco would deliver substantial consumer benefits, universal appeal to all types of customer, experience across a wide range of store types and world class managerial team to the benefit of customers,
    communities, staff, and suppliers.”

  • Asda: Asda’s chief Tony DeNunzio argued that Wal-Mart-owned Asda has a smaller national store network than its larger rivals Tesco and Sainsbury, especially in the Safeway strongholds of the South-East, London and East Anglia. A successful Asda bid would therefore enhance competition, he added. Another key benefit highlighted by Asda was that it would be able to bring much lower prices to Safeway shoppers.

The retailers were not the only voices to be heard, however. A spokesman for the National Farmers' Union told the assembly that it “would be gravely concerned if any deal resulted in the UK food retail market being further dominated by two main companies. A situation where two companies account for 50 percent of the retail food market would not be in (consumers’ or farmers’) interests. If the further concentration of food retail power continues and competition is reduced, the effect on farmers could be catastrophic.”
KC's View:
We spoke to someone from another company who attended the commission hearings, and were told (in colorful terms not fit for a family website) that the overwhelming impression was of food companies far more interested in their own competitive positions than in consumer benefits. Which isn’t at all surprising, though one has to wonder if the odor of pure self-interest was as evident to the commission.

Ironically, the Competition Commission announced yesterday that it would expand its probe to include how supermarket competition in the UK is affecting areas like nonfoods…just as Tesco announced that it has cut prices by between five and 63 percent on over 1,000 products, many of them nonfood.

And the competition rages on…