The proposed merger between Asda and Sainsbury’s has been thrown into serious doubt after the Competition and Markets Authority (CMA) issued a damning provisional report that was highly critical of the deal.
The CMA said the proposed merger could lead to a “worse experience” for in-store and online shoppers across the UK, citing higher prices, a poorer shopping experience, and reductions in the range and quality of products offered. It also voiced concerns that fuel prices could rise at over 100 locations where Sainsbury’s and Asda petrol stations overlap.
The competition watchdog also has concerns that the merger could lead to a substantial lessening of competition at both a national and local level.
Stuart McIntosh, Chair of the independent inquiry group carrying out the investigation, was quick to point out that the findings are provisional.
“The companies and others now have the opportunity to respond to the analysis we’ve set out,” he said. “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 set out two options to rectify the situation: blocking the deal entirely or the sell-off of a “significant number” of stores and other assets – possibly including either of the Sainsbury’s or Asda brands.
The watchdog warned that it is “likely to be difficult” for the companies to address its concerns.
Interested parties now have until 6 March to respond to the CMA’s possible remedies and until 13 March to its provisional findings. The CMA’s final report will be issued by 30 April.
The GMB union, which represents Asda workers and has voiced concerns over the deal since its announcement, said it would now “absolutely oppose” any merger that would see “hundreds of stores and scores of depots” put at risk.
The union’s General Secretary Tim Roache said the CMA’s provisional findings were “staggering”.
“If this merger were allowed to go ahead, we could see thousands of jobs at risk in everything from stores and distribution, to head office and home shopping,” he said.
“The price shoppers and workers face paying for this merger is simply too high.”
The report also took industry analysts by surprise. Catherine Shuttleworth, CEO of shopper and retail marketing agency Savvy, said the watchdog’s conclusions didn’t fit with precedent and failed to consider the growing influence of the discounters in a changing grocery market.
“The thought that a merged Asda-Sainbury’s could push up prices is ludicrous in what would remain one of the most competitive grocery markets in the world,” she said.
Richard Lim, Chief Executive of Retail Economics said the provisional findings were a “hammer blow” to the merger: “The scope of any potential recommendations in the final stage may be too much to swallow for the deal to survive.”