Regulator could block Sainsbury’s-Asda merger over “extensive” concerns

The Competition and Markets Authority (CMA) has highlighted “extensive” concerns regarding the proposed Sainsbury’s-Asda merger. As part of the second stage of its investigation, the body said the deal could lead to a “worse experience” for both in-store and online shoppers due to higher prices, poorer shopping experience and reductions in range and quality.

The CMA also said the merger could lead to a “substantial lessening of competition at both a national and local level”.

A Sainsbury's-Asda spokesperson said the merger would create cost savings for shoppers. "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."

The two supermarket giants must now revise its plans surrounding the merger to address the concerns of the CMA.

The government body has suggested Sainsbury’s and Asda could sell off a “significant number” of stores and other assets – potentially one of the two brands. Sainsbury's shares nosedived following the comments from the CMA this morning. 

“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,” said Stuart McIntosh, chair of the independent inquiry group carrying out the 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. 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.”

Patrick O’Brien, UK retail research director for GlobalData, commented: “The CMA’s provisional findings on the proposed merger of Asda and Sainsbury’s have devastated any prospect of the merger going ahead. Rather than just point to a number of stores that would need to be divested as had been expected, the CMA has raised concerns about the tie-up in just about every conceivable way – on national and local grounds, on store and online competition concerns and on major stores, convenience stores and petrol stations. The CMA even outlined how difficult the required level of divestments needed would be to action."

He added: “While Sainsbury’s CEO Mike Coupe vows to fight on, this may be because he cannot concede without losing face. The confidence he placed in getting the deal past the CMA in light of its previous - generous - decision to allow Tesco to buy Booker looks like a bad misjudgement now, and recent results have seen Sainsbury’s fall behind its rivals, inviting the suggestion that management have taken their eye off the ball.”

The CMA’s final report will be issued by the end of April.

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