The Competition and Markets Authority (CMA) has prohibited the merger of Sainsbury's and Asda merger after finding it would lead to increased prices in stores, online and at many petrol stations across the UK. As a result, Sainsbury's, Walmart and Asda have mutually agreed to terminate the transaction.
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.
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 of their 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.
Sainsbury's CEO Mike Coupe says: "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 £1b out of customers' pockets.
The CMA panel says it carefully 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.
An industry commentator, professor John Colley, of Warwick Business School, states: “This is good news for customers. Sainsbury’s CEO Mike Coupe may have promised he would pass on £1b of savings to customers over three years, but that figure was never verifiable nor credible. Prices move up and down all the time. Over three years it would have been impossible to assess what prices would have been without the merger. Allowing two chains - Tesco and Asda-Sainsbury’s – to share almost 60% of the market would have resulted in less choice and competition, creating the risk of higher prices."
