CMA blocks merger between Sainsbury’s and Asda

The UK Competition and Markets Authority (the CMA) found that shoppers and motorists would be worse off if Sainsbury’s and Asda were to merge due to price rises, reductions in the quality and range of products available, and/or a poorer overall shopping experience across the UK, not just in the areas where Sainsbury’s and Asda stores overlap.

The decision, which has found that there was “no effective way of addressing [the independent panel’s] concerns, other than to block the merger”, follows a furious backlash from the two companies prompted by the CMA’s provisional findings issued in February 2019.

In those findings, the CMA laid out limited options for addressing its “extensive” competition concerns, including “requiring the merging companies to sell off a significant number of stores and other assets – potentially including one of the Sainsbury’s or Asda brands – to recreate the competitive rivalry lost through the merger”, although it admitted that it was “likely to be difficult for the companies to address the concerns it has identified”.

The CMA’s decision sends a clear message: that demonstrating savings and efficiencies are now of critical importance, especially in the grocery sector. In its final report, the CMA recognised that the estimated level of cost savings possible in connection with the merger was higher than it had calculated in its provisional findings. As a result, it noted that there was less of a risk of the merged entity unilaterally raising prices or cutting the quality of its services. However, these increased efficiencies were not sufficient to prevent the CMA blocking the transaction in its entirety.

Serving as a further example of the CMA’s desire to flex its enforcement muscles to keep pace with modern markets, this report is now likely to be the final word on the matter as neither party is rumoured to be considering an appeal.