UK competition body stops Sainsbury’s-Asda proposed merger deal

UK – The UK competition watchdog, Competition and Markets Authority (CMA) has blocked the proposed merger between retail chains Sainsbury’s and Asda amid extensive competition concerns.

The competition authority cited concerns around possible price monopolies, likely to increase the cost of goods in British retail stores as well as online.

In its report, CMA noted that the merger between UK’s largest supermarkets would probably affect the quality of service as well as reduction in the range of products available for customers.

Decision to block the merger was also attributed to a possibility of higher prices at petrol forecourts, reductions in the quality and range of products available, fewer online delivery options for consumers, and an overall weaker customer experience.

“It’s our responsibility to protect the millions of people who shop at Sainsbury’s and Asda every week,” said Stuart McIntosh, chair of the inquiry group that led the investigation into the merger.

“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.”

Competition and price ‘hike’ concerns

Last year, Sainbury’s tabled a US$10 billion merger bid with Asda in aspiration to close the gap between it and UK’s largest retailer, Tesco.

The move meant that Sainsbury’s, number two retailer in the UK was hoping to merge with Asda, the third largest chain, a strategy that retailers viewed as ‘very competitive’.

According to consumer insights firm, Kantar Worldpanel, Tesco accounts for 27.4% of the UK grocery market, while Sainsbury’s and Asda each have around 15% share, while Morrisons come in fourth with 10.3% of the market share.

The merger has received opposition from both retailers and consumers despite the two retailers previously agreeing to binding price cuts.

They had offered to offload between 125 and 150 of their supermarkets as a way to meet anti-trust concerns.

The retailers however, maintained that combining Sainsbury’s and Asda would create significant cost savings, which would allow them to lower prices.

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Commenting on the CMA’s directive, Asda CEO Roger Burnley, said: “Asda’s DNA is delivering low prices for hard working families and that will never change.

“We were right to explore the potential merger with Sainsbury’s, which would have delivered great benefits for customers and supported the long-term, sustainable success of our business.

“We’re disappointed with their findings but will continue to find ways to put money back into customer’s pockets and deliver great quality and service in an ever-changing and demanding market.”

CMA had earlier cited multiple problems with the merger, indicating that it was likely to be difficult for the companies to address the concerns it has identified.

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