The CMA shut down the £12bn merger between Sainsbury's and Asda. © Getty Images
The CMA shut down the £12bn merger between Sainsbury's and Asda. © Getty Images

Sainsbury's and Asda merger blocked

25 April 2019

A proposed £12bn merger between Asda and Sainsbury’s has been blocked by the government’s competition watchdog amid fears that shoppers and motorists would be “worse off.”

The merger was terminated today by the Competition and Markets Authority (CMA). In its final summary report, the CMA cited concerns over increased prices, a reduction in product quality, and a “substantial lessening of competition” in 1,239 local areas across the UK.

The CMA concluded that the merging of Sainsbury’s and Walmart-owned Asda would result in higher prices for products in stores, online and at petrol stations.

Last month, the retailers disputed the provisional findings from the CMA, which had rejected claims that procurement efficiencies generated by the merger would allow consumers to benefit from lower prices.

In response to the CMA's provisional findings, they offered to cap the amount of profit made on petrol, and sell up to 150 stores in order to relieve concerns that the merger would dominate the market.

However, their attempts to address the CMA’s concerns have failed and Stuart McIntosh, chairman 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.”

He added: "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.”

McIntosh said: "We have concluded that there is no effective way of addressing our concerns, other than to block the merger."

The merger, proposed in 2018, aimed to reduce procurement costs by consolidating the purchasing of goods and services, and other efficiencies. The retailers had estimated that within three years of the deal everyday items would be reduced by 10% and customers would be saving £1bn due to lower prices.

Roger Burnley, Asda chief executive, said he was “disappointed” by the CMA's decision. 

And Sainsbury’s CEO, Mike Coupe, remarked: “The specific reason for wanting to merge was to lower prices for customers.” 

He added: “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 £1 billion out of customers' pockets."

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