Sainsbury’s-Asda merger in jeopardy – BBC News

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The UK’s competition watchdog has said the proposed tie-up between Sainsbury’s and Asda could push up prices and cut choice for customers.

The Competition and Markets Authority (CMA) said it was “likely to be difficult” for the chains to “address the concerns”.

The CMA also said the merger could lead to a “poorer shopping experience”.

Sainsbury’s boss told the BBC the findings were “outrageous” and he would continue to challenge them.

Chief executive Mike Coupe described the CMA’s analysis as “fundamentally flawed” and said the firm would be making “very strong representations” to it about its “inaccuracy and lack of objectivity”.

“They have fundamentally moved the goalposts, changed the shape of the ball and chosen a different playing field,” he told the BBC.

“This is totally outrageous.”

These are the CMA’s provisional findings and the firms will have a chance to respond.

The watchdog said it had identified two potential remedies: either blocking the merger entirely or forcing the sale of “assets and operations”.

‘Lower prices’

The deal would create a business accounting for £1 in every £3 spent on groceries, with a 31.4% market share and with 2,800 stores.

Stuart McIntosh, chair of the CMA’s independent inquiry group, said: “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.”

However, in a joint statement, Sainsbury’s and Asda said combining the two chains 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.”

The CMA will reach its final decision on 30 April.


Analysis

Dominic O’Connell, Today business presenter

Supermarket bosses know that British competition regulators have always had a strong interest in the grocery market. There has been a string of inquiries over the last two decades, both into individual deals and the bigger question of how well the market serves consumer interests.

So Sainsbury’s board members would have been nervous when they proposed a takeover of Asda last year – but they did at least have the encouragement that the Competition and Markets Authority (CMA) had approved a tie-up between Tesco and Booker just a few months earlier.

Unfortunately for them, the light at the end of the tunnel turned out to be an oncoming train.

The regulator has crushed Sainsbury’s plans. There is no veto, but the strong language used, and the breadth of the problems found, suggest there is no way back.

What is more, in the fine print of the findings, what little hope there might have been is further choked: the CMA notes that requiring Sainsbury’s and Asda to sell stores “might not be an effective remedy”.

The question now is what next.

Mike Coupe, Sainsbury’s chief executive, is convinced the CMA is decision is wrong. He said the company would go away and consider its options, but did not rule out some kind of judicial challenge to the findings.