CMA blocks proposed merger between Sainsbury's and Asda

CMA blocks proposed merger between Sainsbury's and Asda

On 25 April, the Competition and Markets Authority (“CMA”) blocked the proposed merger between J Sainsbury plc (“Sainsbury’s”) and Asda Group Limited (“Asda”).

Under the proposed merger announced on 30 April last year, Sainsbury’s was to purchase Asda from Walmart. The merger would have created the largest grocery retailer by sales share, accounting for £1 in every £3 spent on groceries, overtaking Tesco and growing to almost three times the size of Morrison’s. The merger would also have created the largest retailer of fuel by volume in the UK.

Both supermarkets had stated that the merger would have created cost-saving efficiencies which would be passed on to UK customers, who would have benefitted from lower prices.

In an effort to obtain the CMA’s approval, the supermarkets had pledged to dispose of 125-150 of their supermarkets, along with some of their petrol stations and convenience stores. They had also promised £1 billon in price cuts for consumers if the deal went ahead.

Nevertheless, the CMA found that, on the balance of probabilities, the merger would have substantially lessened competition at a national and local level and decided to prohibit the merger in its entirety. The CMA’s main concerns were that the merger would have resulted in:

  • increased prices for consumers in-store, online and at petrol stations;
  • reductions in the quality and range of products available; and
  • a poorer overall shopping experience including increased length of queues and reduced quality of service such as fewer delivery options when shopping online.

The CMA concluded that there was no effective way to address their concerns, other than to block the merger. Following the CMA’s announcement, the supermarkets have reportedly agreed to terminate the deal rather than seek to appeal the CMA’s decision.

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