Blocked: Sainsbury’s-Asda merger denied by CMA

Sun sets on proposed mega merger as the competition watchdog concludes deal would lead to price hikes, less choice and a poorer experience for shoppers

Written by Rhys Thomas

Posted 25.04.2019 | Retail

Blocked: Sainsbury’s-Asda merger denied by CMA thumbnail

The multi-billion pound merger between Sainsbury’s and Asda has been blocked by the Competition and Markets Authority over fears it will diminish consumer choice and lead to rising prices across the country.

The CMA concluded the proposed deal to combine the UK’s second and third largest supermarkets would be detrimental to shoppers, hitting both their wallets and the quality of products on shelves. If it were permitted, the watchdog said, a merger would lead to “substantial lessening of competition at both a national and local level”.

In its final report, published today, the CMA laid out the damning findings of its in-depth investigation: less choice, price hikes, reduced quality and a poorer overall shopping experience, including fewer delivery options for those who choose to shop online.

“Disappointed”: Sainsbury’s and Asda chiefs reluctantly terminate merger plans

Stuart McIntosh, who chaired the inquiry, said: “We have concluded that there is no effective way of addressing our concerns, other than to block the merger.”

Sainsbury’s and Asda’s parent company Walmart announced their intention to combine into one entity last April. They said the move would create a “dynamic new player in UK retail with an outstanding breadth of products”, but it has been hampered from the start by competition worries.

An initial investigation by the CMA found that the new combined company would in fact have the opposite effect, instead leading to a situation where the new combined business and Tesco, the UK’s largest supermarket group by some margin, would hold nearly two thirds of the market share.

Sainsbury’s and Asda offered to sell off around 150 of its locations and petrol stations to assuage concerns, as well as pledging £1bn in price cuts for shoppers should the deal be given the go ahead, but it was not enough to convince the CMA. 

A statement from Sainsbury’s confirmed the two parties have agreed to terminated further merger discussions.

Sainsbury’s chief executive Mike Coupe echoed previous sentiments that he believed the CMA had failed to understand the nuances of “the dynamic and highly competitive nature of the UK grocery market”, adding that by blocking the deal the watchdog was “effectively taking £1 billion out of customers' pockets”.

Walmart CEO Judith McKenna, said: "While we’re disappointed by the CMA’s final report and conclusions, our focus now is continuing to position Asda as a strong UK retailer delivering for customers.”

But for now it’s back to business for Asda boss Roger Burnley: "We’re disappointed with [the CMA’s] findings… Our focus is now on the most important job we all have – delivering for our customers.”

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