Sainsbury's-Asda merger on knife edge after CMA findings

The CMA said the combination of Britain’s second- and third-largest supermarkets “could lead to a worse experience for in-store and online shoppers across the UK through higher prices, a poorer shopping experience, and reductions in the range and quality of products offered”.

Revealing its provisional findings of a phase two inquiry into the merger, the CMA said it has concerns on “both a national and a local level”. It identified 629 local markets across the UK where the combination could create a “substantial lessening of competition”.

The watchdog will now either block the deal, or insist that the grocer sells off “a significant number of stores and other assets”, which could include one of the Sainsbury’s or Asda brands, in order to “recreate the competitive rivalry lost through the merger”.

The CMA said its view at this stage of the probe was that it would be “difficult for the companies to address the concerns it had identified”.

Speaking on BBC Radio 4’s Today programme this morning, Sainsbury’s boss Mike Coupe dubbed the verdict “outrageous”.

He said the CMA had “fundamentally moved the goalposts, changed the shape of the ball and chosen a different playing field.

“A UK plc with Brexit looming, and a completely unpredictable set of competition rules, who would invest in this country? This is just outrageous.”

In a joint statement, Sainsbury’s and Asda accused the CMA of “moving the goalposts” compared with previous cases it has investigated. The grocers added that the findings “fundamentally misunderstand how people shop in the UK today and the intensity of competition in the grocery market”.

A spokeswoman for the two retailers said: “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.”

Provisional findings

Stuart McIntosh, chair of the independent inquiry group carrying out the CMA’s investigation, 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.”

In addition to concerns around the impact on customers shopping in Sainsbury’s and Asda stores, the CMA warned the merger could drive up prices and reduce the quality of service for the grocers’ online shoppers.

The watchdog also said it believes the deal could lead to inflated fuel costs in 132 locations where Sainsbury’s and Asda petrol stations overlap.

Sainsbury’s, Asda and its grocery rivals now have until March 13 to respond to the CMA’s provisional findings. Its final report will be issued by April 30.