Sainsbury's £12bn merger with Asda blocked by regulator because it would raise prices for consumers
The proposed £12bn merger between Sainsbury’s and Asda has been blocked by the UK’s competition watchdog over fears it would lead to raised prices for consumers.
In its final report on the deal, the Competition and Markets Authority (CMA) said the tie-up would lead to increased prices in stores, online and at petrol stations across the UK.
The watchdog said shoppers and motorists would be “worse off” if Sainsbury’s and Walmart-owned Asda were to merge, adding that the move would lead to reductions in the quality and range of products or a poorer overall retail experience.
The CMA claimed that the deal would have resulted in a “substantial lessening of competition” at both a national and local level for people shopping in supermarkets.
Stuart McIntosh, chair of the CMA inquiry group, said: “It’s our responsibility to protect the millions of people who shop at Sainsbury’s and Asda every week.
“We have concluded that there is no effective way of addressing our concerns, other than to block the merger.”
Sainsbury’s boss Mike Coupe said the decision effectively took £1bn out of customers’ pockets.
Before Thursday’s decision, Sainsbury’s and Asda had offered to sell up to 150 stores as part of efforts to address competition concerns, and claimed that shoppers would be deprived of lower prices should the merger be blocked.
The duo had pledged to make a number of post-merger commitments, had the deal been approved, including investing £1bn a year in lowering prices by the third year of the deal completing, equating to a 10 per cent cut on everyday items.
Mr Coupe said on Thursday: “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, Walmart and Asda have now mutually agreed to terminate the transaction.
The merger would have created a supermarket titan bigger than Tesco with revenues of £51bn and a network of 2,800 Sainsbury’s, Asda and Argos stores.
But fears were expressed that suppliers could get squeezed as a result, with the tie-up giving the merged entity increased buying power.
The move to reject the tie-up marks the first major decision the CMA has made since the appointment of former Tory MP Andrew Tyrie as chair.
It remains unclear where the duo goes from here, but it is understood that Walmart will continue to look to sell Asda to another buyer.
Walmart chief executive 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.
“Walmart will ensure Asda has the resources it needs to achieve that.”
Asda boss Roger Burnley said he was “disappointed” by the CMA’s decision, but Caroline Normand, director of advocacy at Which?, said the CMA was right to block the merger.
She added: “Sainsbury’s and Asda have fallen behind the pack recently in this trusted sector – with both finishing in the bottom four of our annual supermarket survey as rivals like Aldi and Lidl have done a better job of giving shoppers what they want.”
PA contributed to this report