CMA blocks Sainsbury's & Asda merger

Sainsbury's and ASDa stores.
“We have found that this deal would lead to increased prices, reduced quality and choice of products, or a poorer shopping experience for all UK shoppers,” said Stuart McIntosh, chair of the CMA inquiry group.
By Reidar Molthe

7 May 2019 09:17

CMA blocks Sainsbury's & Asda merger

Britain’s competition regulator has blocked Sainsbury’s proposed 7.3-billion-pound takeover of Walmart owned Asda. It is not unexpected, but nonetheless a huge blow to the supermarket groups who wanted to combine to overtake market leader Tesco.

Mike Coupe, CEO of Sainsbury’s.
Mike Coupe, CEO of Sainsbury’s.

The Competition and Markets Authority (CMA) said in its final report last week that the deal would lead to increased prices in stores, online and at many petrol stations.

Hence Sainsbury’s, Walmart and Asda said they have mutually agreed to terminate the transaction costing the two companies huge sums in sunken costs.

Sainsbury boss, Mike Coupe, says he will continue to lead the supermarket chain and that he has full board confidence.

Less competition and increased prices

Following an in-depth investigation, a group of independent CMA panel members concluded that the deal would result in a substantial lessening of competition at both a national and local level for people shopping in supermarkets. This would mean shoppers right across the UK would be affected, not just in the areas where Sainsbury’s and Asda stores overlap.

Stuart McIntosh, chair of the inquiry group, says:

“It’s our responsibility 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 UK shoppers. We have concluded that there is no effective way of addressing our concerns, other than to block the merger.”

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 making the decision to prohibit the merger, the Group reviewed a wide range of issues in detail, 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.

Whilst the panel carefully considered these industry developments, they did not allay its serious competition concerns about the merger.

The Group also 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.

This final decision to block the deal follows the publication of the CMA’s provisional findings and a subsequent consultation period, during which the CMA reviewed responses from a variety of interested parties, including Sainsbury’s and Asda themselves.

This is CMA

The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law.

The CMA’s decisions in phase 2 merger inquiries are made by inquiry groups chosen from the CMA’s independent panel members.

The members of the inquiry group are Stuart McIntosh (Inquiry Chair), Richard Feasey, Roland Green, John Thanassoulis, and Claire Whyley.

The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy or business; the membership of an inquiry group usually reflects a mix of expertise and experience.

Sources: CMA, Reuters, Asda, Sainsbury’s.

More News from FOOD