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Author Topic: Sainsbury's-Asda merger.  (Read 1988 times)
Jon MW
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« Reply #15 on: February 22, 2019, 06:48:15 AM »

Poor business and lack of foresight by Asda/Sainsbury imo.
It was pretty obv when the proposed merger was first published that the Govt/monopolies commission were going to be all over it. They must know the rules around it.

It's the 2nd biggest and 3rd biggest merging, as soon as I saw the proposal my first thought was, 'how can they let that happen?'.
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Jon "the British cowboy" Woodfield

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« Reply #16 on: February 22, 2019, 08:32:36 AM »

These threads always interest and educate me, and sometimes they change my thinking too.

Initially I though the Government should just keep their nose out of business and let market forces do their thing. Now I'm teetering on the fence and could come down on either side.

I think debate threads are great, except for the contributions that of people who's arguments are so weak they have to resort to name calling.

Silly bastards.
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kukushkin88
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« Reply #17 on: February 22, 2019, 08:55:11 AM »

These threads always interest and educate me, and sometimes they change my thinking too.

Initially I though the Government should just keep their nose out of business and let market forces do their thing. Now I'm teetering on the fence and could come down on either side.

I think debate threads are great, except for the contributions that of people who's arguments are so weak they have to resort to name calling.

Silly bastards.

It is probably a mistake to assume a correlation between weak arguments and a weakness for insulting the intentionally and deliberately ignorant.
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buffyslayer1
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« Reply #18 on: February 22, 2019, 09:48:55 AM »

The monopolies aren't a problem. I can't think of an example where companies start exploiting their customers. When a supermarket sends independent retailers under its because they offer more choices e and lower prices. When the independents go under we don't see supermarkets scaling back choice and ramping up prices

And where their monopoly does see them stagnate we see innovative alternatives like Aldi move in and hoover up market share.

Government should stay the hell out of this


A lot of the more complicated monopoly cases often take years and by the time they are close to ending the so called collosous has been out flanked by more nimble competition.

Think of the strangle hold that the likes of dell, nokia, EMI etc had over their respective industries before being blind sided by things like MP3 players and smart phones

pokerstars is one example
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EvilPie
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« Reply #19 on: February 22, 2019, 09:58:42 AM »

The monopolies aren't a problem. I can't think of an example where companies start exploiting their customers. When a supermarket sends independent retailers under its because they offer more choices e and lower prices. When the independents go under we don't see supermarkets scaling back choice and ramping up prices

And where their monopoly does see them stagnate we see innovative alternatives like Aldi move in and hoover up market share.

Government should stay the hell out of this


A lot of the more complicated monopoly cases often take years and by the time they are close to ending the so called collosous has been out flanked by more nimble competition.

Think of the strangle hold that the likes of dell, nokia, EMI etc had over their respective industries before being blind sided by things like MP3 players and smart phones

It's not just customers that can be exploited, there's a huge supply chain out there that would get shafted left, right and centre if their already short list of buyers reduced even further.

Sainsbury's/Asda would market it as improved buying power leading to better prices for our customers. What they really mean is that they can now pay less for their chickens and also make the chicken farmer wait 120 days for his money instead of the previous 90.
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teddybloat
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« Reply #20 on: February 22, 2019, 11:21:20 AM »

buffyslayer1

Well stars are not a monopoly by any means. they acquired a huge market share by out competing bigger rivals on price, spread of games and customer service. they may be currently be exploiting their customers but there are sites like party poker and new start ups like RIO poker that are seeking to innovate and take back their market share.

years ago planet poker or party were the monoliths.


government should be staying out of mergers altogether.


if there ever is a case where companies can simply exploit customers by increasing profits without increasing output then very quickly they will attract rivals. and competition does not usually come from imitation, big companies are blindsided by innovation.

EMI buys virgin and is blind sided by the ipod.

Nokia completely owns the mobile market and doesnt see the iphone.

Microsoft is famously run through the courts for bundling internet explorer and exploiting  monopoly power and at the same time open source projects like firefox overtake them. they are also out manoeuvred by apple and google. they lose market share not to other PC operating systems but people using tablets, televisions and phones to access the internet and perform computing tasks. They could not have seen these changes coming.

IBM's monoploy case lasts about 15 years, by the time it came to an end it was a bit part player as the home computer had become ubiquitous and its mainframe monopoly wasn't worth a carrot.

we didnt need governments to break up these so called monopolies. its worth noting that none of those companies attempted to reduce output when they had so called monopoly power.

you may get some short term protection for some consumers but in the long term breaking up companies, preventing them from merging, and not allowing signals to be sent to markets makes us all worse off.

re suppliers.


Suppliers prices may well be squeezed. but they cant be forced below the marginal cost, otherwise they would be better off not selling at all.

an equilibrium will be found and the although a small sector will see reduced profits the benefits are accrued by consumers.
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Jon MW
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« Reply #21 on: February 22, 2019, 12:25:44 PM »

...

Suppliers prices may well be squeezed. but they cant be forced below the marginal cost, otherwise they would be better off not selling at all.
...

This periodically already happens at the moment with the supermarkets for things like milk - so saying it 'can't be' is already wrong.
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Jon "the British cowboy" Woodfield

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« Reply #22 on: February 22, 2019, 12:52:09 PM »


government should be staying out of mergers altogether.


What about bank mergers? Should they stay out of that and just let them get as big they like?
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« Reply #23 on: February 22, 2019, 01:08:30 PM »

Not only that, they should let them fail too.
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« Reply #24 on: February 22, 2019, 01:14:51 PM »


government should be staying out of mergers altogether.


What about bank mergers? Should they stay out of that and just let them get as big they like?


I'm not saying you're wrong, I'm just trying to get my head around this.

Why allow supermarkets at all, why not just limit everyone to a corner shop?
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« Reply #25 on: February 22, 2019, 01:22:45 PM »

Not only a corner shop. But when there is only one corner shop in an area they should break it up.

What they shouldn't do is allow a bigger shop to offer more choice and lower prices to the poor consumer....
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Jon MW
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« Reply #26 on: February 22, 2019, 01:38:35 PM »


government should be staying out of mergers altogether.


What about bank mergers? Should they stay out of that and just let them get as big they like?


I'm not saying you're wrong, I'm just trying to get my head around this.

Why allow supermarkets at all, why not just limit everyone to a corner shop?

The free market is good - you should never interfere with the free market.

If there are say 4 or 5 corner shops and one does better than the others - it gets more customers and it can grow.

If it grows it can benefit from economies of scale and offer lower prices to it's customers and carry on growing.

If it just keeps the benefits of economies of scale for itself to increase profits, one or more of the others could catch up with it and grow itself.

The system is self correcting and self policing - if one company tries to exploit it's customers the others will benefit from it.

You should never interfere with the free market.


The problem is that the free market doesn't mean never doing anything.

Pokerstars could probably be used as a text book case study.
It acquired a strong market share by basically providing the best service - it then took over Full Tilt to have an overwhelmingly dominant market share.

As soon as it was sold to corporate investors they parlayed every trick in the book to exploit the customer base for as much as they can get away with - this isn't the free market.

They could only do that because it has an anti-competitive share of the market.

(this segues into oligopolies quite quickly but there's no need to get too complicated too quickly Smiley )



Short version:  the free market is fine - but when companies get too much market share you no longer have a free market; government's should only interfere when they 'have' to do so to ensure the continuing function of a free market.
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Jon "the British cowboy" Woodfield

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« Reply #27 on: February 22, 2019, 04:18:50 PM »

stars are still playing in an open market and there's nothing to say that their new strategy will be able to hold onto its market share. plenty of other sites have been dominant in the online poker scene and faded to obscurity.  when and if stars do lose its customer base it may well be to something to something other than an online poker site: fantasy sports for example. i hope you wouldnt advocate governments getting involved in setting the rake.

the point is government has no place interfering even if there is only one player in a market. capital is fast and if a company is able to increase profits whilst reducing output, quality of service and quality of products then very quickly capital will flow to compete for those profits.

and it often leads to huge innovation.


look at the tesco article posted above. at one point one in every six pounds spent in retail was spent in tesco. if there is ever a barrier to entry, supermarkets where surely it. yet aldi and lidl where able to better serve customers and took a huge market share of the unassailable.

the music publishing industry was dominated by just a few big players, yet apple and spotify has put them all out of business by offering an alternative way to consume music.

we dont need government to prevent monopoly. their involvement may ensure some small short term gain, but it prevents progress and innovation long term.
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« Reply #28 on: February 22, 2019, 06:32:44 PM »

The suggestion that monopolies (and by implication collusive practices) should be allowed, is ludicrous.

If asda and sainsburys agreed together to refuse to pay suppliers more than a certain amount for various products and agreed not to price cut on these products, they would be be charged with a criminal offence.  

The test of whether a merger should go ahead would be whether the price fixing scheme described above would be successful - ie no competitor could profitably undercut the colluders' retail prices due to the colluders' control of supplier prices.  It clearly would be successful at some level of market share and competitors can't ever "out compete" (they can only agree to similarly collude).

Once you accept that market dominance has exactly the same effect as price fixing collusion, it is clear that government intervention is the only solution.

A question about competition:

Who thinks that price match guarantees are competitive and who thinks they are anti-competitive?



« Last Edit: February 22, 2019, 06:41:33 PM by doubleup » Logged
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« Reply #29 on: February 22, 2019, 06:36:32 PM »

stars are still playing in an open market and there's nothing to say that their new strategy will be able to hold onto its market share. plenty of other sites have been dominant in the online poker scene and faded to obscurity.  when and if stars do lose its customer base it may well be to something to something other than an online poker site: fantasy sports for example. i hope you wouldnt advocate governments getting involved in setting the rake.

the point is government has no place interfering even if there is only one player in a market. capital is fast and if a company is able to increase profits whilst reducing output, quality of service and quality of products then very quickly capital will flow to compete for those profits.

and it often leads to huge innovation.


look at the tesco article posted above. at one point one in every six pounds spent in retail was spent in tesco. if there is ever a barrier to entry, supermarkets where surely it. yet aldi and lidl where able to better serve customers and took a huge market share of the unassailable.

the music publishing industry was dominated by just a few big players, yet apple and spotify has put them all out of business by offering an alternative way to consume music.

we dont need government to prevent monopoly. their involvement may ensure some small short term gain, but it prevents progress and innovation long term.


What is the mechanism for preventing progress and innovation?  It just feels like this causes no barriers to innovation at all; the Government aren't stopping Aldi or Amazon by this merger.

Of course the Government should interfere in markets on some occasions, it is just a question of where we draw the line.   Good examples are health and housing.  Given the concentration of the World's wealth amongst a small number of billionaires, it is a bit easier to argue that Governments should have interfered more in the markets over the years.

I am a Sainsbury shareholder, and even in that situation I can see they have a point on this proposed merger.  
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