Asda and Sainsbury's merger composite shot 2

CMA said the deal would lead to a “worse experience” for shoppers

The proposed merger between Sainsbury’s and Asda suffered a crushing blow today after the Competition & Markets Authority (CMA) found the deal would lead to higher prices at stores across the UK.

The CMA said the deal would lead to a “worse experience” for both in-store and online shoppers nationally, by leading to reductions in the range and quality of products offered.

The CMA said the merger risked leading to a substantial lessening of competition at both a national and local level.

In what experts are already suggesting could be a fatal blow to the deal, it said potential remedies for the would-be merger partners would include blocking the deal completely, the sale of a significant number of stores across the UK, or potentially the sale of one of the Sainsbury’s or Asda brands.

In a damning summary of its provisional findings, in the crucial Phase 2 investigation, the authority said it thought it would be “difficult for the companies to address the concerns it has identified”.

The CMA also found the merger could see prices soar at the petrol pumps at more than 130 of Sainsbury’s and Asda’s petrol stations.

“These are two of the biggest supermarkets in the UK, with millions of people purchasing their products and services every day,” said Stuart McIntosh, chair of the independent inquiry group carrying out the investigation.

“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.”

The CMA is now calling on responses from interested parties to provisional findings by 13 March and has issued a notice of possible remedies by 6 March, with its final report due by 30 April 2019.

‘Fundamental misunderstanding’

A spokeswoman for Sainsbury’s and Asda accused the CMA of having “fundamentally misunderstood” how competition affected consumers.

“These findings fundamentally misunderstand how people shop in the UK today and the intensity of competition in the grocery market,” she said.

“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.”

More updates and analyst reactions to follow