Watchdog finds 'extensive concerns' in Sainsbury's and Asda merger

Marco Green
February 20, 2019

At this stage in its Phase 2 investigation, the Competition and Markets Authority (CMA) has found that the proposed deal could lead to a worse experience for in-store and online shoppers across the United Kingdom through higher prices, a poorer shopping experience, and reductions in the range and quality of products offered.

"The proposed deal could lead to a worse experience for in-store and online shoppers across the United Kingdom through higher prices, a poorer shopping experience, and reductions in the range and quality of products offered", the CMA said in a written statement.

It also believes the deal could lead to inflated fuel costs at more than 100 locations where Sainsbury's and Asda petrol stations overlap.

The regulator said it was "likely to be hard for the companies to address the concerns it has identified".

The CMA is consulting on the provisional findings and also the possible remedies, with responses due by March 13 and March 6 respectively.

The watchdog said selling one of the two brands could "recreate the competitive rivalry lost through the merger", though experts said the actions to address its concerns would leave the deal dead.

Stuart McIntosh, chair of the CMA's independent inquiry group, said it had found "very significant competition concerns in a number of areas - they are to do with grocery shopping in supermarkets, grocery shopping online and the companies' petrol stations".

Market share of UK supermarkets
Sainsbury's-Asda deal on the brink after watchdog raises 'extensive' concerns

"They have fundamentally moved the goalposts, changed the shape of the ball and chosen a different playing field", he told the BBC.

Bernstein's Monteyne said there were now enough worries at Sainsbury's "to make the shares almost uninvestable in the next few months".

The Competition and Markets Authority has today revealed it has "extensive" concerns over the proposed merger.

The Competition and Markets Authority (CMA) will publish the provisional decision ahead of a statutory deadline, which has been extended to the end of April.

The deal would create the UK's biggest supermarket chain, a business accounting for £1 in every £3 spent on groceries, with a 31.4% market share and 2,800 stores. "Combining Sainsbury's and Asda would create significant cost savings which would allow us to lower prices". "We therefore assume that the proposed merger will have to be abandoned - even though Sainsbury's and Asda may not openly accept the inevitability of that outcome at this stage".

The CMA has provisional concerns that the merger could lead to a substantial lessening of competition at both a national and local level.

"For Sainsbury's we see this as a major blow and one that removes the merger premium and so we downgrade to SELL, noting its laggard status in British supermarketing", Shore Capital said.

Other reports by Click Lancashire

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