LONDON (AFP) – The planned mega-merger of British supermarket giant Sainsbury’s and Walmart-owned Asda raises “extensive competition concerns” and could spark higher prices and less choice, regulators warned yesterday.
The Competition and Markets Authority (CMA) watchdog, revealing the provisional findings of an in-depth probe, added it could potentially block the deal – or require both companies to sell a “significant” number of stores and other assets including one of the two brands.
The regulator cautioned it would be “difficult for the companies to address the concerns it has identified”, as its remedies seek to “recreate the competitive rivalry lost through the merger”.
“The CMA has provisionally found extensive competition concerns as part of its in-depth investigation of the proposed merger,” the watchdog said in a statement that sparked immediate criticism from the two retail giants.
Sainsbury’s and Asda, the nation’s second and third biggest supermarket chains respectively, unveiled merger plans in April 2018 to create a retail king that would leapfrog UK number one Tesco.
The CMA warned yesterday that the deal “could lead to a worse experience for in-store and online shoppers across the UK through higher prices, a poorer shopping experience, and reductions in the range and quality of products”.
“It also has concerns that prices could rise at a large number of Sainsbury’s and Asda petrol stations.
“The CMA has provisional concerns that the merger could lead to a substantial lessening of competition at both a national and local level.
“The combined impact means that people could lose out right across the UK and that the deal could also cost shoppers through reduced competition in particular areas where Sainsbury’s and Asda stores overlap.”
In response, the pair replied in a joint statement that the CMA had “fundamentally misunderstood” how people shop in Britain and the “intensity of competition” in the sector, adding its analysis was “inconsistent” with comparable cases.
The deal comes as long-established UK retailers battle sliding consumer sentiment, and fierce competition from online US titan Amazon – as well as German-owned discounters Aldi and Lidl.
The merger is however effectively a takeover bid with Sainsbury’s acquiring a majority 58-per cent stake in the combined group and Walmart the rest.
Yesterday’s news sent Sainsbury’s share price tumbling 13 per cent in morning deals on the London stock market, which was up 0.5 per cent overall.