The grilling by MPs of the bosses of Asda and Sainsbury’s was painful. Not for Roger Burnley and Mike Coupe, but for poor viewers obliged to listen to Neil Parish – the verbose chair of the environment, food and rural affairs select committee – answer his own questions rather than try to extract useful information.
It really shouldn’t take 20 minutes to solve the non-mystery of why Burnley and Coupe reckon their combined share of the grocery market would be 25% while the rest of the world thinks 30% is nearer the mark. Burnley and Coupe are including Boots, B&M Bargains and everybody who sells a sandwich or a bottle of detergent. Their numbers are cheeky but aren’t hard to decipher.
Nor does the precise figure matter terribly. The basic point remains: Tesco plus Asda/Sainsbury’s would have 50%-60% of the market, depending on how tightly one defines the supermarket sector. It is a degree of dominance that would not be tolerated via acquisition in most important consumer markets. Is such a structure likely to operate against the interests of consumers and small suppliers?
When the MPs finally got round to the question, they encountered Sainsbury’s Coupe at his woolliest. He would seek to buy products from “multinationals” at the lower of the two prices the chains secure separately today. Some of those savings would then go to consumers in the form of 10% price cuts on loosely defined “everyday” items. But smaller suppliers wouldn’t be squeezed, apparently, and, hey, some might even benefit from being able to sell to a bigger supermarket operator.
This happy picture of a land where the nice folk win and only fat “multinationals” lose rather ignores the fact that Nestlè, Procter & Gamble, Unilever et al may not play ball. What if big suppliers, in turn, put pressure on their own primary producers, including UK farmers? What if Coupe can’t deliver the £350m-a-year buying benefits he has promised the City? Would he then exploit the wriggle room in his “10% off products I won’t name in full” pledge and try to extract the difference from shoppers?
Let us hope the Competition and Markets Authority, led by former MP Andrew Tyrie, who knew how to run a select committee with more bite, secures clearer answers. By any traditional measure, Sainsbury’s takeover of Asda looks anticompetitive. It would permanently alter a supermarket sector that is working well for consumers. As for small suppliers, one doubts many will be reassured by Coupe’s vague promises.
Murdoch has not lost his touch
Rupert Murdoch has played a blinder. Six months after he agreed to sell the bulk of 21st Century Fox to Disney, the bidder has upped its offer to $71.3bn (£54bn), a monumental jump of nearly $20bn from its original all-share proposal. This time Disney is even offering to pay half in cash as it tries to see off Comcast’s rival $65bn all-cash bid.
The real worth of the Fox assets – including the film and TV studios, some US cable networks and the stake in Sky in the UK – clearly hasn’t improved by 38% since last December. All that’s happened is the depth of panic among big US media players that has been revealed. Nobody wants to be too small to confront the rise of Netflix. Fox, deemed to be the last significant asset in play, is the one they want. The rivalry between Disney’s Bob Iger and Comcast’s Brian Roberts merely adds spice to the action.
For now, Fox prefers Disney’s offer but reserves its right to switch sides if Comcast bids even higher. That is probably the way to bet since corporate ego, as much as cold financial calculation, is driving the action. You have to admire Murdoch’s timing. He’s a seller when everybody else wants to be a buyer.
‘Reprehensible’ delay by the Treasury
The government’s attempt to delay implementing curbs on fixed-odds betting terminals is indefensible. If a reduction in maximum stakes to £2 is judged to be a sensible way to combat problem gambling, then get on with it.
The only practical obstacle seems to be the technical one of giving the bookmakers enough time to re-programme the machines. But, since the experts are agreed the task could be completed in a fortnight, it can’t be right to wait until 2020, which seems to be the official plan.
The dead hand of the Treasury, which gets about £600m a year from duty on the machines currently, must be at work. “Morally reprehensible” – dissenting MPs’ verdict on the delay – is correct. A principled reform is being held up for no good reason.