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CMA flags concerns over Sainsbury's and Asda merger

The Competition and Markets Authority’s inquiry group that is examining the proposed merger between Sainsbury’s and Asda has said that its provisional findings have led it to believe that the deal could lead to an increase in prices, a poorer shopping experience and a reduction in the range and quality of products offered.

FOOD & DRINK

CMA flags concerns over Sainsbury's and Asda merger

The Competition and Markets Authority’s inquiry group that is examining the proposed merger between Sainsbury’s and Asda has said that its provisional findings have led it to believe that the deal could lead to an increase in prices, a poorer shopping experience and a reduction in the range and quality of products offered.

Following the Phase 2 Investigation, the CMA is also concerned that the cost of fuel could rise at more than 100 locations where Sainsbury’s and Asda petrol stations overlap.

In a statement, Stuart McIntosh, chair of the independent inquiry group, said: “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.

“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.”

The CMA has set out potential options for addressing its provisional concerns. These include blocking the deal or requiring the supermarkets to sell off a significant number of stores and other assets, potentially including one of the Sainsbury’s or Asda brands.

The organisation said: “The CMA’s current view is that it is likely to be difficult for the companies to address the concerns it has identified.

“The CMA now welcomes responses from interested parties to its provisional findings by 13 March 2019 and its notice of possible remedies by 6 March 2019.”

Sainsbury’s announced in April last year that it had agreed terms with Asda owner Walmart for the potential merger. The supermarket said at the time that both brands would be maintained that it did not plan to close any Sainsbury’s or Asda stores.

Commenting on the CMA's provisional findings, a spokesperson for Sainsbury’s and Asda said: “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.

“Combining Sainsbury’s and Asda would create significant cost savings, which would allow us to lower prices. 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.”

 

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