UK blocks merger: Sainsbury’s and Asda would dominate market

The UK has blocked the Sainsbury’s-Asda merger after investigation reveals that prices would increase, unfair trading methods could be used, and store closures would severely impact Northern Ireland

In its final report, published today, the Competition and Markets Authority (CMA) found that UK shoppers and motorists would be worse off if Sainsbury’s and Asda – two of the country’s largest supermarkets – were to merge. This is due to expected price rises, reductions in the quality and range of products available, or a poorer overall shopping experience.

Mr. John Armour, policy manager for National Farmers Union Scotland, said during the evidence stage:

“We believe that there would be greater potential for unfair trading practices if 6
there was to be a company with this market share and if there is a reduction in
the market share at the top of the grocery retail supply chain.

“We have also been concerned by media reports around this merger and headlines such as
‘Sainsbury’s vows to slash prices after Asda merger’.”

Mr. Armour is referring to how a merger would give Asda and Sainsbury’s 30% of the market shares. Currently, 8 companies have 93% of the market.

Following an in-depth investigation, a group of independent CMA panel members concluded that the deal would result in a substantial lessening of competition at both a national and local level for people shopping in supermarkets. This would mean shoppers right across the UK would be affected, not just in the areas where Sainsbury’s and Asda stores overlap.

Nazia Ali, for Consumer Council Northern Ireland, said:

“One in two people in Northern Ireland are vulnerable. A lot of the vulnerable consumers tend to be the elderly ones who live in the rural areas, so, the physical supply of stores is going to be massively important to these kinds of consumers.

“In a lot of places in Northern Ireland where you live quite rurally you do not actually get internet signal. So, online shopping can be very difficult for these elderly consumers and, if there is a lack of stores, then their getting to a store could be very difficult as well.”

Stuart McIntosh, chair of the inquiry group, said:

“It’s our responsibility to protect the millions of people who shop at Sainsbury’s and Asda every week. 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.

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

“The CMA’s investigation found that, as well as affecting in-store customers, the merger would result in increased prices and reduced quality of service, such as fewer delivery options, when shopping online. Furthermore, it would lead to motorists paying more at over 125 locations where Sainsbury’s and Asda petrol stations are located close together.

In making the decision to prohibit the merger, the Group reviewed a wide range of issues in detail, such as the increased competition presented by discount stores like Lidl and Aldi, and how new or expanding competitors could affect the retail market, including online.

Whilst the panel carefully considered these industry developments, they did not allay its serious competition concerns about the merger.

The Group also carefully reviewed the companies’ statement they would cut some prices.

However, detailed analysis of the impact of the deal clearly showed that, overall, the merger would reduce competition in the market and is more likely to lead to price rises than price cuts.

This final decision to block the deal follows the publication of the CMA’s provisional findings and a subsequent consultation period, during which the CMA reviewed responses from a variety of interested parties, including Sainsbury’s and Asda themselves.