UPDATE 3 — The UK’s Competition and Markets Authority (CMA) has blocked Sainsbury’s £7.3 billion takeover of Walmart’s Leeds-based subsidiary Asda after finding it would lead to increased prices in stores, online and at many petrol stations across the UK.
Such a merger would have created the UK’s largest supermarket group by market share, overtaking Tesco.
Sainsbury’s, Walmart and Asda said they had all agreed to terminate the transaction, deciding not to challenge the ruling through the Competition Appeal Tribunal.
Sainsbury’s CEO Mike Coupe said: “The specific reason for wanting to merge was to lower prices for customers.
“The CMA’s conclusion that we would increase prices post-merger ignores the dynamic and highly competitive nature of the UK grocery market.
“The CMA is today effectively taking £1 billion out of customers’ pockets.
“Sainsbury’s is a great business and I am confident in our strategy.
“We are focused on offering our customers great quality, value and service and making shopping with us as convenient as possible.”
In its final report, the 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,” said the CMA.
“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.”
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 said its 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,” said the CMA.
“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.”
Further details are available on the CMA’s Sainsbury’s / Asda case page.