In-store and online grocery shoppers could suffer a worse customer experience buying from a merged Sainsbury’s and Asda, the Competition and Markets Authority (CMA) has said.
The statement comes at the end of the CMA’s phase 2 investigation into the proposed merger of the two supermarkets. If it went ahead, the deal, first unveiled last spring, would account for about a third of the grocery market. It envisaged, the two retailers said when the deal was announced, “a complementary network for more than 2,800 Sainsbury’s, Asda and Argos stores and several of the UK’s most visited retail websites to create greater choice for customers through more store formats and channels.”
But today the CMA said that it was that a “substantial lessening of competition” at national and local level would mean that shoppers lose out, especially in areas where Sainsbury’s and Asda stores are currently located near to each other. The CMA also believes that the merger “could drive up prices and reduce the quality of service for online customers.”
Start McIntosh, chair of the independent inquiry group carrying out the investigation, 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. We also have concerns that prices could rise at a large number of their petrol stations.
“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 says that options for addressing its concerns range from blocking the deal to requiring the two companies to sell “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.” It also said that it thought it would be difficult for the merger partners to address its concerns. The CMA is now looking for responses to the provisional findings by March 13 and responses to its notice of potential remedies by March 6, ahead of a final report to be issued on April 30.
In a joint statement, Sainsbury’s parent company J Sainsbury plc and Asda said they fundamentally disagreed with the provisional findings. “These misunderstand how people shop in the UK today and the intensity of competition in the grocery market," said a spokesperson. "The CMA has moved the goalposts and its analysis is inconsistent with comparable cases.
“Combining Sainsbury’s and Asda would create significant cost savings which would allow us to lower prices. Despite the savings being independently reviewed by two separate industry specialists, the CMA has chosen to discount them as benefits.
“We are surprised that the CMA would choose to reject the opportunity to put money directly into customers’ pockets, particularly at this time of economic uncertainty.
“We will be working to understand the rationale behind these findings and will continue to make our case in the coming weeks.”
Image: InternetRetailing Media/Paul Skeldon