Wednesday, January 22, 2020

How did the competition commission tame the supermarket giants :: Business and Management Studies

How did the competition commission tame the supermarket giants The Competition Commission is an independent public body established by the Competition Act 1998. The Competition Commission conducts in-depth inquiries into mergers, markets and the regulation of the major regulated industries, undertaken in response to a reference made to it by another authority. The Commission recently had the task of having the power to give one major supermarket chain the go ahead to merge with Safeway. The proposed acquisition of Safeway by Morrison’s, Asda, Tesco or Sainsbury’s was referred to the Competitive Commission under the Fair Trading Act by the Trade and Industry Secretary. The Commission can consider the opinions of all parties in determining whether any of the potential mergers is against the public interest. Topics for inclusion in the meeting could include both local and national issues, including the effect on consumers and suppliers of any proposed acquisition. The Competition Commission gave Morrison’s the green light over the other potential buyers such as Asda, Tesco and Sainsburys. This was due to a number of economic reasons. Although neither Safeway nor Morrison’s was struggling, both agreed the need to merge was very advantageous. Morrison’s was looking for a way to grow far more quickly, and could afford to fund an acquisition to achieve that goal as soon as possible. The successful bid for Morrison’s to take over Safeway would mean that Morrison’s would become a major and strong national player. The merge should exert a positive and competitive effect on retail in supermarkets and also benefit the customers. Some people found the Morrison’s bid to be against the public interest in particular local areas where the number of competing supermarkets would be reduced. However, subject to divestment of particular stores in these areas. Morrison’s bid for Safeway was allowed to proceed. The Competition Commission was given just over four and a half months to investigate the four merger situations. All of these needed to be assessed as to their likely impact on competition. Mainly in terms of which would be the most practical to economy. The decision was partly mad by undertaking isochrone analysis, which is mapping and positioning of stores area by area and the customers they serve. This provided detailed information on which areas would be affected as a result of reduced local competition. Morrison’s the medium-sized but very fast-growing British supermarket chain takeover of UK rival Safeway deal was worth 2.9bn.The combined firm, with 598 stores, a turnover of 12.6bn and a market share of 16%, aims to be able to compete with Asda, Sainsbury and Tesco, the giants of the UK supermarket sector. Both Morrison’s and Safeway have been

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