UK: The Competition and Markets Authority (CMA) has blocked the proposed merger between Sainsbury’s and Asda, deciding that UK consumers would be worse off.
Following an in-depth investigation, a group of independent CMA panel members concluded that the deal merging two of the country’s largest supermarkets would result in a substantial lessening of competition at both a national and local level for people shopping in supermarkets. Specifically, it expected price rises, reductions in the quality and range of products available, or a poorer overall shopping experience.
Stressing that it was the CMA’s responsibility to protect the millions of people who shop at Sainsbury’s and Asda every week, Stuart McIntosh, chair of the inquiry group, said: “We have concluded that there is no effective way of addressing our concerns, other than to block the merger.
In a statement, Sainsbury’s CEO, Mike Coupe, said: “The specific reason for wanting to merge was to lower prices for customers. The CMA’s conclusion that we would increase prices post-merger ignores the dynamic and highly competitive nature of the UK grocery market. The CMA is today effectively taking £1bn out of customers’ pockets.”
The CMA’s investigation found that, as well as affecting in-store customers, the merger would result in increased prices and reduced quality of service, such as fewer delivery options, when shopping online. Furthermore, it would lead to motorists paying more at over 125 locations where Sainsbury’s and Asda petrol stations are located close together.
In coming to its decision, the CMA said it reviewed a wide range of issues, such as the increased competition presented by discount stores like Lidl and Aldi, and how new or expanding competitors could affect the retail market, including online, but these did not allay its serious competition concerns about the merger.
The CMA also carefully reviewed the companies’ statement they would cut some prices. However, detailed analysis of the impact of the deal clearly showed that, overall, the merger would reduce competition in the market and is more likely to lead to price rises than price cuts.