Consumers Association backs Morrison bid for Safeway
Lobbying group boosts northern chain’s chances
February 8 2003
The Consumers’ Association has told regulators that Morrisons bid for rival UK supermarket chain Safeway should be allowed to go through without a full competition enquiry.
The views of the lobbying organisation, which carry official weight with the Competition Commission, are a significant boost for Morrisons. The northern chain has seen five other potential bidders emerge since its offer for Safeway was launched a months ago.
The CA said the combination of Safeway and Morrison, the fourth and fifth biggest UK supermarket operators, will benefit consumers. Its detailed analysis of likely impact on prices seems to confirm the view expressed by Safeway and Morrison when the bid was announced that there is little overlap between the two store estates. Safeway has since withdrawn its support for the Morrisons’ bid.
The CA said: “A fourth aggressive player in the market would strengthen consumer choice and ensure that consumers have as competitive a market as possible”.
In its 36-page formal submission to the OFT, the CA countered its support for Morrisons by highlighting concerns over potential bids from Tesco, Sainsbury’s and Wal-Mart.
It said: “We would be concerned if any of these bids leads to the creation of an ineffective triopoly. In the case of the bid by Morrison this possibility does not arise and we see absolutely no reason for this bid to be referred to the Competition Commission.
“However, the bids by Asda, Sainsbury and Tesco raise issues of such importance that a reference to the Competition Commission for them is essential.”
The CA also quoted concerns over price flexing raised in the Competition Commission report on the supermarket sector two years. The practice changing prices to take local cometioion into account is used by Sainsbury’s and Tesco, although Asda’s policy is to charge the same prices at all its stores.
The CA did not comment on possible bids from Kohlberg Kravis Roberts and Philip Green, since neither has made a submission to the OFT yet.
