Publishing its final report into the deal, the Competition and Markets Authority (CMA) argued that the tie-up would lead to increased prices in stores, online and at petrol stations across the UK.
Shoppers and motorists would be “worse off” if Sainsbury’s and Walmart-owned Asda were to merge, the CMA noted, adding that a merger would lead to price rises, reductions in the quality and range of products or a poorer overall retail experience.
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.
Stuart McIntosh, chairman of the CMA inquiry group, said: “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.”
Sainsbury’s chief executive Mike Coupe said that the decision effectively takes £1bn out of customers’ pockets.
Prior to the CMA decision, Sainsbury’s and 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.
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.”
Sainsbury’s, Walmart and Asda have now mutually agreed to terminate the transaction.
Analysts at Shore Capital noted: “Well, the referee has now blown the whistle on a deal that we give credit to its architect(s) for being bold but were set against a strategy and tactics that were most certainly not of a mould of the likes of Sir Alex Ferguson.
“Indeed, arrogance and naivety are words that come to mind when considering this proposed amalgamation from start to finish.”
Tim Roache, GMB union general secretary, said: “For Asda workers, this is the right decision after the CMA’s provisional findings.
“Swathes of stores and depots would have to have been sold off, with jobs put at risk and no real benefit for customers or communities.
“The workforce has been through months of uncertainty, worrying about what’s going to happen and wondering if their stores or depots would be sold from under them.
“It’s time for Asda to move on, and to give some stability and security to the staff who work day in, day out to make the company profitable.”
John Moore, senior investment manager at Brewin Dolphin, said: “After months of speculation that the proposed Sainsbury’s-Asda merger would hit the rocks, perhaps it’s no surprise that the CMA has decided to block the deal.
“The prospect of higher prices for consumers appears to have been the deciding issue for the CMA. This returns the focus to the UK grocery market, which is highly competitive, and now both businesses will need to concentrate their energies on reinvigorating and perhaps re-imagining their individual offerings to shoppers.
“This is particularly true for Sainsbury’s which has slipped to third in terms of market share – perhaps ironically, falling behind Asda – according to Kantar’s analysis earlier in April.
“Then, of course, there’s the ever-present challenge posed by the discounters, in the shape of Aldi and Lidl, which are going from strength to strength.”
Roger Burnley, chief executive of Asda, said: “Asda’s DNA is delivering low prices for hard working families and that will never change. We were right to explore the potential merger with Sainsbury’s, which would have delivered great benefits for customers and supported the long term, sustainable success of our business.
“We’re disappointed with their findings but will continue to find ways to put money back into customers’ pockets and deliver great quality and service in an ever changing and demanding market.
“I have always been hugely aware that the last year has been an unsettling time for all of our colleagues and am immensely grateful for their commitment and dedication during that time. Our focus is now on the most important job we all have – delivering for our customers.”