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Friday 23 August 2019

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CMA raises concerns over Sainsbury’s Asda merger

Written by Peter Walker
20/02/19

The Competition and Markets Authority (CMA) has provisionally found extensive competition concerns as part of its in-depth investigation of the proposed merger between Sainsbury’s and Asda.

At this stage in its Phase 2 investigation, the regulator reported that the proposed 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 offered.

The CMA also suggested 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.

Stuart McIntosh, chair of the independent inquiry group carrying out the investigation, pointed out: “These are our provisional findings, 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 deal was agreed at the end of April last year, with a combined company resulting in Asda owner Walmart holding 42 per cent of the issued share capital and receiving £2.97 billion of cash, valuing Asda at approximately £7.3 billion on a debt-free, cash-free and pension-free basis.

It took the CMA until August to start its investigation, with Sainsbury’s and Asda asking to move more quickly to the in-depth phase of the inquiry through a ‘fast-track’ process.

As well as concerns for people shopping in their stores, the CMA is concerned the merger could drive up prices and reduce the quality of service for online customers.

It has set out potential options for addressing its provisional concerns, including blocking the deal or 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.

The CMA’s current view is that it is likely to be difficult for the companies to address the concerns it has identified.

It is now taking responses from interested parties to its provisional findings by 13 March. The final report will be issued by 30 April.



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