CMA cites customer experience fears in resistance to Sainsbury's/Asda merger

Sainsbury’s chief executive Mike Coupe has reacted angrily to the results of an investigation by the Competition and Markets Authority (CMA) into the company’s proposed merger with Asda.

According to the CMA, “the proposed deal could lead to a worse experience for in-store and online shoppers across the UK though higher prices, a poorer shopping experience, and reductions in the range and quality of products offered”.

The CMA also has provisional concerns about reduced competition at both a national and local level. It has set out options that include blocking the merger deal or requiring the retailers to sell of a significant number of stores – potentially including either the Sainsbury’s or Asda brand – to recreate a degree of competition in the market.

“These are two of the biggest supermarkets in the UK, with millions of people purchasing their products and services every day. We have provisionally found that, should the two merge, shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK. We also have concerns that prices could rise at a large number of their petrol stations,” says Stuart McIntosh, chair of inquiry carrying out the CMA’s investigation.

“These are our provisional findings, however, and the companies and others now have the opportunity to respond to the analysis we’ve set out today,” adds McIntosh. “It’s our responsibility to carry out a thorough assessment of the deal to make sure that the sector remains competitive and shoppers don’t lose out.

Interviewed on BBC Radio 4, Coupe described the CMA’s analysis as flawed and inaccurate.

“They have fundamentally moved the goalposts, changed the shape of the ball and chosen a different playing field,” says Coupe. “This is totally outrageous.”

Coupe referred Tesco’s takeover of Booker, which was approved by the CMA a few months before the Sainsbury’s and Asda merger was proposed.

Sainsbury’s and Asda have released a joint statement this morning in response to the CMA’s announcement:

“These findings fundamentally misunderstand how people shop in the UK today and the intensity of competition in the grocery market. The CMA has moved the goalposts and its analysis is inconsistent with comparable cases.

“Combining Sainsbury’s and Asda would create significant cost savings, which would allow us to lower prices. Despite the savings being independently reviewed by two separate industry specialists, the CMA has chosen to discount them as benefits.

“We are surprised that the CMA would choose to reject the opportunity to put money directly into customers’ pockets, particularly at this time of economic uncertainty.

“We will be working to understand the rationale behind these findings and will continue to press our case in the coming weeks.”

What’s Hot on Essential Retail?