Sainsbury’s and Asda could be forced to sell one of the brands after merger deemed ‘bad for customers’
The competition watchdog has raised serious concerns around price and competition, saying the merger between Sainsbury’s and Asda would need some major changes, including the possibility of selling either the Sainsbury’s or Asda brand, to go through in a decision Sainsbury’s has called “outrageous”.
The proposed merger between Sainsbury’s and Asda could be in jeopardy after the UK’s competition watchdog said the tie-up could lead to a “poorer experience” for customers.
The Competition and Markets Authority (CMA) says the merger 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”.
The CMA highlighted provisional concerns that the merger could lead to a “substantial lessening of competition at both a national and local level”. It adds that the combined impact might mean people could “lose out right across the UK and that the deal could also cost shoppers through reduced competition in particular areas where Sainsbury’s and Asda stores overlap.”
The CMA also shared concerns that prices could rise at a large number of Sainsbury’s and Asda petrol stations.
Crucially, the watchdog believes it would be “difficult” for the chains to address these concerns.
The CMA says it could block the deal or require the merging companies to sell off a significant number of stores and other assets, potentially including one of the Sainsbury’s or Asda brands to recreate the competitive rivalry lost through the merger.
Speaking to the BBC, Sainsbury’s chief executive Mike Coupe called the CMA’s findings “outrageous” and “fundamentally flawed”, adding that the firm would make “very strong representations” to it about its “inaccuracy and lack of objectivity”.
He added: “They have fundamentally moved the goalposts, changed the shape of the ball and chosen a different playing field.”
Analysts have raised doubts as to whether the merger will now go through. Richard Lim, CEO of Retail Economics, says: “These provisional findings deliver a hammer blow to the potential tie-up between Sainsbury’s and Asda. Protecting the interests of consumers is paramount and the CMA chose not to mix its words with the second phase finding extensive competition concerns. The scope of any potential recommendations in the final stage may be too much to swallow for the deal to survive.”
