Asda merger with Sainsbury’s sparks price rise fears

The proposed merger between supermarkets Asda and Sainsbury’s has been blocked by the Competitions and Markets Authority (CMA), which claimed it would raise prices for consumers and worsen the overall shopping experience.

The merger between ASDA and Sainsbury's has been blocked.
The merger between ASDA and Sainsbury's has been blocked.

The CMA said that the planned tie-up would lead to a poorer retail situation for shoppers in stores and petrol stations across the country, increasing prices and reducing the quality and range of products available.

The watchdog claimed that the deal would have resulted in a “substantial lessening of competition” at both a national and local level for people shopping in supermarkets.

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Stuart McIntosh, chairman of the CMA 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.”

Sainsbury’s, Walmart and Asda have now mutually agreed to terminate the transaction.

Mike Coupe, Sainsbury’s chief executive, said the firm was “confident” in its strategy, but warned that the CMA 
was “effectively taking £1 billion out of customers’ pockets”.

Caroline Normand, Which? director of advocacy, said: “The CMA is right to block this merger, which could have reduced competition in the sector resulting in a number of problems for shoppers including increased prices, reduced quality and choice, and a poorer shopping experience.”

Prior to yesterday’s decision, Sainsbury’s and Walmart-owned Asda had offered to sell up to 150 stores as part of efforts to address competition concerns, and claimed that shoppers would be deprived of lower prices should it be blocked.

But the CMA found 537 areas where there could be a substantial reduction in competition in supermarkets.

The duo had also pledged to make a number of post-merger commitments, had the deal been approved. It included investing £1 billion a year in lowering prices by the third year of the deal completing, equating to a 10 per cent cut on everyday items.

Roger Burnley, the Asda boss, said he was “disappointed” in the CMA’s decision.

Unions reacted with delight, with the GMB and Unite hailing it as a victory for staff amid fears of store closures and job losses as a result of the deal.