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The proposed merger between UK supermarket chains Sainsbury’s and Asda suffered a significant setback on Wednesday after a report was published by the UK's Competition and Markets Authority (CMA).
The watchdog investigating the proposed merger found that the deal could lead to “a substantial lessening of competition” for UK shoppers both nationally and locally.
The proposals, announced last April, would lead to the merged retailers having 2,800 stores and a 31.4% market share in the UK groceries market.
“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,” said Stuart McIntosh, chair of the independent inquiry group.
The CMA also found that the merger could lead to increased fuel costs at over 100 locations where Sainsbury’s and Asda have petrol stations.
Options for addressing the CMA concerns have been set out and include requiring the companies to sell off “a significant number of stores” or one of the Sainsbury’s or Asda brands.
Ultimately the deal looks likely to be blocked with CMA stating: “It is likely to be difficult for the companies to address the concerns it has identified.”
Sainsbury’s and Asda now have until 13 March to respond to CMS ahead of a final report being published on 30 April.
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