The Competition and Markets Authority (CMA) has blocked the proposed merger of Sainsbury’s and Asda after concluding that “UK shoppers would be worse off”.
In its final report on the proposed deal, the CMA said it expected the merger would lead to increased prices in stores, online and at petrol stations, while reducing the quality and range of products available.
Chair of the CMA inquiry group, Stuart McIntosh, said it was the responsibility of the CMA to “protect the millions of people who shop at Sainsbury’s and Asda every week”.
“Following our in-depth investigation, we have found this deal would lead to increased prices, reduced quality and choice of products, or a poorer shopping experience for all of their UK shoppers,” he said. “We have concluded that there is no effective way of addressing our concerns, other than to block the merger.”
The CMA also reviewed the companies’ statement they would cut some prices, but found that the merger would reduce competition in the market and was more likely to lead to price rises than price cuts.
Responding to the ruling, 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. Sainsbury’s is a great business and I am confident in our strategy. We are focused on offering our customers great quality, value and service and making shopping with us as convenient as possible.”
GMB Union general secretary Tim Roache said the CMA had made the right decision.
“For Asda workers, this is the right decision after the CMA’s provisional findings. Swathes of stores and depots would have to have been sold off, with jobs put at risk and no real benefit for customers or communities,” he said.
“The workforce has been through months of uncertainty, worrying about what’s going to happen and wondering if their stores or depots would be sold from under them. It’s time for Asda to move on, and to give some stability and security to the staff who work day in, day out to make the company profitable.”
But marketing agency Savvy ceo Catherine Shuttleworth, said the CMA’s view that it would be difficult to track prices post merger were “completely unbelievable”.
“It has never been easier to track supermarket prices. Additionally Sainsbury’s had committed to a transparent audit of pricing by a third party post any merger,” she said.
“The more we hear from the CMA the more we should be concerned that they are not working in the best interests of consumers and clearly do not understand the market dynamics of the UK grocery sector.”