The UK Competition and Markets Authority (CMA) has found that Leeds-based Asda’s £611 million purchase of the Co-op’s 132 petrol stations and attached stores could lead to higher prices or less choice for motorists or shoppers in 13 areas of the UK.
The CMA said on Tuesday Asda must address its concerns to avoid an in-depth “Phase 2” investigation of the deal.
The CMA said: “Asda now has five working days to offer legally binding proposals to the CMA to address the competition concerns identified.
“The CMA would then have a further five working days to consider whether these proposals address its concerns, or if the case should be referred to an in-depth, Phase 2 investigation.”
The regulator said its investigation focused on a number of local areas in which Asda and the Co-op sites that it acquired compete to provide fuel or groceries to customers.
“The CMA found that the deal raises competition concerns in 13 locations across the UK, in each of which the merging businesses currently compete for customers and would not face sufficient competition after the merger,” said the CMA.
“The deal could therefore lead to consumers and businesses in these areas facing higher prices or lower quality services when shopping or buying fuel.
“Asda told the CMA that competition concerns would not arise in these areas because the merger would enable Asda to bring its low-cost pricing model to more customers.
“But as the CMA’s investigation in this case focussed on local areas in which the merging businesses currently compete for customers, competition concerns only arise in areas in which Asda is already an important option for customers, who already have access to Asda prices.
“The CMA found that allowing Asda to acquire more sites in those areas, leaving it facing insufficient competition in future, could therefore risk worse outcomes for customers.”
Colin Raftery, CMA Senior Director of Mergers, said: “Groceries and fuel account for a large part of most household budgets.
“As living costs continue to rise, it’s particularly important that deals that reduce competition among groceries and fuel suppliers don’t make the situation worse.
“While competition concerns don’t arise in relation to the vast majority of the 132 sites bought by Asda, there’s a risk that customers could face higher prices or worse services in a small number of areas where Asda would face insufficient competition in either groceries or fuel after the deal goes through”.
Asda said it has responded “to the anticipated findings of the Competition and Markets Authority’s (CMA) Phase 1 investigation into its acquisition of 132 grocery retail sites, with attached petrol stations, from The Co-op.”
Asda co-owner Mohsin Issa said: “We note the findings of the CMA’s Phase 1 inquiry into our acquisition of 132 Co-op stores and their identification of 13 potential areas of competition concern.
“We look forward to working constructively with the CMA over the coming days as we consider their findings.
“We remain committed to our long-term strategy to build a convenience business and bring Asda’s great value in fuel and groceries to more customers and communities throughout the UK.”