The planned merger could be in jeopardy, as the Competition and Markets Authority (CMA) today issues a damning report, suggesting possible action would be to block the deal entirely or insist the supermarket chains sell off a “significant” number of stores to a suitable party, and potentially ditch either the Sainsbury's or Asda brand.
Stating that it would be “difficult for the companies to address the concerns it has identified”, the CMA seems to favour a prohibition of the merger altogether, as it believes a divestiture of assets designed to recreate the competitive rivalry lost through the merger, “carries a significant risk of being an ineffective remedy”.
The watchdog also believes, allowing the merger to proceed, even with extensive divestitures, would ultimately, “represent a major restructuring of the UK groceries sector and its market dynamics”, resulting in weaker competitive pressures across its markets, at both a national and local level.
The issues raised by the CMA suggest the proposed merger, may result in higher prices and/or lower quality of offering, leading to a worse experience for in-store and online shoppers across the UK.
If allowed to go ahead, the deal would result in a merger between the second and third-largest grocery retailers in the UK and two and four of the largest retailers of online delivered groceries in the UK.
Chair of the independent inquiry group carrying out the investigation, Stuart McIntosh, said today: “These are two of the biggest supermarkets in the UK, with millions of people purchasing their products and services every day. We have provisionally found that, should the two merge, shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK.”
He added: “These are our provisional findings, however, and the companies and others now have the opportunity to respond to the analysis we’ve set out today. It’s our responsibility to carry out a thorough assessment of the deal to make sure that the sector remains competitive and shoppers don’t lose out.”
The CMA now welcomes responses from interested parties to its provisional findings by March 13, 2019 and its notice of possible remedies by March 6, 2019. The CMA’s final report will be issued by the end of April.