Sainsbury’s-Asda merger at risk as watchdog says deal could push up prices for shoppers

Deal could be blocked as regulator says it is 'likely to be difficult for the companies to adress the concerns it has identified'

Caitlin Morrison
Wednesday 20 February 2019 09:23
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Sainsbury's boss Mike Coupe responds to CMA findings on Asda merger

The proposed £12bn merger between Sainsbury’s and Asda is at risk after the competition watchdog said the deal risks pushing prices up and reducing the quality of products offered to consumers.

The Competition and Markets Authority (CMA) published the latest findings from its investigation into the deal, which was announced in April last year, on Wednesday.

The watchdog said the proposed deal 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.

It also has concerns that prices could rise at a large number of Sainsbury’s and Asda petrol stations.

Stuart McIntosh, chair of the independent inquiry group carrying out the 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."

Mr McIntosh added: “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.”

Sainsbury’s boss Mike Coupe criticised the CMA’s analysis and said it was “fundamentally flawed”.

“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.”

Sainsbury's CEO sings 'We're in the Money' before ITV News segment about £12 billion merger with Asda

A spokesperson for Sainsbury’s and Asda said: “These findings fundamentally misunderstand how people shop in the UK today and the intensity of competition in the grocery market. The CMA has moved the goalposts and its analysis is inconsistent with comparable cases.

“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.”

Shares in Sainsbury's dropped 12.5 per cent in early trading.

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