Supermarket merger

Afew years ago, it would have been inconceivable that a merger would have been allowed between Sainsbury’s and Asda, or even contemplated. On the face of it the expected deal looks anti-competitive, since they would together control almost one third of the superstore market and overtake Tesco as the leader in the field.

But so rapidly is the retail world changing that regulators are expected to look favourably on the plan, albeit with strings attached. Walmart, the US owner of Asda, hopes to focus on competing with Amazon, which is moving into this and every other market. The so-called Big Four no longer dominate in the way they once did. Scale is important if the chains are to survive against the twin threat of home deliverers and cut-price traders like Lidl and Aldi. Tesco recently took over the food wholesaler, Booker, in a £4billion deal waved through by the Competitions and Markets Authority. In view of that decision, the CMA would be hard-pressed to justify blocking a Sainsbury’s-asda merger.

The CMA could require a sale of stores, as happened when Morrisons took over Safeway, though the geographical strength of Sainsbury’s in the South and Asda in the North may persuade regulators that they will not suffocate competitors. Moreover, getting buyers for big stores would not necessarily be easy. The growing consumer desire is for more local stores; Aldi and Lidl shops, which now have 12 per cent of the market, tend to be much smaller than their competitors.

The Government is being urged to intervene in this battle of the giants. But it would do better to devise a strategy for reviving our dying high streets with tax incentives and a clampdown on extortionate parking charges.