The proposed merger between Sainsbury’s and Asda is in jeopardy after phase two of the Competition and Markets Authority’s (CMA) investigation provisionally found “extensive competition concerns.”
The £10bn deal could lead to “a worse experience for in-store and online shoppers across the UK through higher prices, a poorer shopping experience, and reductions in the range and quality of products offered,” the CMA said.
It also has concerns that prices could rise at more than 100 locations where Sainsbury’s and Asda petrol stations overlap.
The merger could lead to a “substantial lessening of competition at both a national and local level,” costing shoppers through reduced competition in particular areas where Sainsbury’s and Asda stores overlap, it added.
Stuart McIntosh, chair of the independent inquiry group carrying out the investigation, said: “These are two of the biggest supermarkets in the UK, with millions of people purchasing their products and services every day.
“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.”
However, the CMA findings said it was “likely to be difficult for the companies to address the concerns identified.”
A spokesman for Sainsbury’s and Asda said the CMA’s findings “fundamentally misunderstood 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,” he said.
“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,” the spokesman added.
The CMA has set out a number of potential remedies for addressing its provisional concerns, including blocking the deal, or requiring the merging companies to sell off a significant number of stores and other assets – potentially including one of the Sainsbury’s or Asda brands – to recreate the competitive rivalry lost through the merger.
There is now a three week consultation period on the provisional findings, with submissions to be received by 13 March.
There is also a two week consultation period on the notice of possible remedies, with submissions on this to be received by 6 March.
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