Although the UK Competition Commission is still to rule on the Safeway’s merger, it is almost unthinkable that it should allow one of the big three supermarkets to reach a 70% market share by merging with Safeway’s. Morrison’s bid is the favorite as a fourth large player would add much needed competition to the market.
Safeway’s prospective partners will have to wait another six days to learn the outcome of the Competition Commission’s deliberations. However, it seems unlikely that they will permit any one of the big three supermarkets to merge, under any but the most crippling conditions.
Tesco, Asda, and J Sainsbury dominate the UK supermarket structure. If any one of them were to merge with Safeway, itself the fourth largest player in the market, it would create an entity with 70% of the UK market share. The Competition Commission would certainly block a move by these three or at least attach conditions that would make a merger all but unfeasible, although Asda is maintaining that it still has a chance.
The current favorite for the bid is Wm Morrison, a much smaller chain from the North of England. With only 5% of the market to its credit, Morrison’s submissions to the Competition Commission have emphasised that, if it were to merge with Safeway, it would create a fourth competitor to the big three and help to stabilize the market. An alternative bid has been made by a private consortium – there are no competition issues to consider here.
It has long been held, particularly by farmers and suppliers, that the UK’s top heavy supermarket structure is bad for consumers. With limited competition, supermarkets have found it easy to drive prices from suppliers down without, so critics say, passing on the entirety of those savings to the consumer. These concerns will inform the Competition Commission’s decision, and make it quite unlikely that any of the big three will have the chance to make a bid. This has led some to conclude that the major supermarkets are only entering bids to hamper the progress of Wm Morrison.
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