Bid by supermarkets to keep merger afloat will lead to many forecourt closures, says PRA

Sainsbury’s and Asda’s response to the Competition and Markets Authority (CMA) threatens the livelihoods of many independent petrol retailers across the UK, according to the PRA.

Last week Sainsbury’s said it would cap its fuel gross profit margin to no more than 3.5 pence per litre for five years, while Asda said it would guarantee its existing fuel pricing strategy, in a strong rebuttal to the findings of the CMA.

In February the CMA had warned that fuel prices could rise at a large number of Sainsbury’s and Asda petrol stations if the proposed merger of the two companies went ahead. In its provisional findings on the proposed merger it found extensive competition concerns.

This week PRA chairman Brian Madderson issued the following response: “The proposed measures to save the struggling merger between Sainsbury’s and Asda will put thousands of independent petrol retailers out of business and decimate consumer choice across the UK, particularly in rural areas."

He said the PRA was very concerned that the measures proposed by Sainsbury’s to get its controversial merger with Asda approved by the CMA, which include a cap on the amount of profit they make on petrol, could lead to job losses and closures across Britain’s network of independent fuel retailers.

All supermarkets have the ability to share the cost of petrol operations with areas of their business that are not available to independent petrol retailers, this has the potential to distort the commercial forces acting on petrol stations.

Madderson said that since 2000, nearly 70% of independent fuel retailers have been forced to close - a fact that coincides with the rapid growth of supermarkets and their entry into the fuel market. He said these closures had significantly reduced the choice for the consumer and are forcing motorists to drive ever further to fill up.

The PRA agrees with the CMA’s fears that the merger will lead to reduced consumer choice and higher prices in the long run, through a substantial reduction in competition.

Madderson continues: “The PRA and its members view the latest proposal from Sainsbury’s and Asda to cap fuel margins as unenforceable and running counter to the CMA’s guidelines that the remedies should not involve behavioural change that requires high-level monitoring and enforcement.

“Independent petrol retailers are already struggling with very high costs including a business rates system that is not fit for purpose; sharply rising wage bills from the government’s National Minimum Wage; and increasing insurance premiums and energy costs.

“This latest attempt by Sainsbury’s and Asda to keep their merger afloat will lead to the closure of hundreds of often small, family-run businesses providing essential services to hard-pressed rural communities.”