Sainsbury’s Asda deal: Why Sainsbury’s merger wasn’t thought to be good for shoppers

Sainsbury’s Asda deal: Why Sainsbury’s merger wasn’t thought to be good for shoppers

Asda and Sainsbury’s proposed a merger last year which, if approved, would have created the largest contender in the UK grocery sector. The two supermarkets had argued the combined authority created from the £13bn merger would have left their customers up to 10percent better off. On top of this, they offered to sell 150 of their stores to address concerns in terms of competition. But ultimately the inquiry into the merger has found against the two companies. 

Why was Sainsbury’s deal with Asda thought to be bad for shoppers? 

The Competition and Markets Authority (CMA) has submitted its final report on the deal, stating shoppers and motorists would be worse off as a result of the merger. 

This concern comes from beliefs combining the two stores would cause suppliers to be under pressure from the dominance of what would be the biggest player in the sector.

Should the deal have gone through, £1 in every £3 spent on groceries in the UK would have been spent in the merged companies stores. 

Sainsbury’s and Asda said merging would cut costs, allowing for cheaper prices for their customers.

Read More: Sainsbury’s and ASDA may sell up to 150 stores

However, Stuart McIntosh, who chaired the CMA inquiry, said nothing proposed by the two companies had alleviated concerns around the merger. 

He said: “It’s our responsibility to protect the millions of people who shop at Sainsbury’s and Asda every week.

“Following our in-depth investigation, we have found this deal would lead to increased prices, reduced quality and choice of products, or a poorer shopping experience for all of their UK shoppers.

“We have concluded that there is no effective way of addressing our concerns, other than to block the merger.”

Mr McIntosh, told the BBC’s Today programme: “It would reduce competition in supermarkets and online grocery shopping and at the companies’ petrol stations.

“We think that is likely to lead to higher prices or other changes which would be unwelcome to shoppers, such as longer checkout queues.”

The decision has prompted Sainsbury’s share price to plummet by more than 6 percent, leaving it down almost 20 percent in the year. 

Mike Coupe, Sainsbury’s chief executive said: “The specific reason for wanting to merge was to lower prices for customers.

“The CMA’s conclusion that we would increase prices post-merger ignores the dynamic and highly competitive nature of the UK grocery market.

“The CMA is today effectively taking £1bn out of customers’ pockets.”

Asda boss Roger Burnley also expressed his disappointment with the decision, saying: “We were right to explore the potential merger with Sainsbury’s, which would have delivered great benefits for customers and supported the long term, sustainable success of our business.”

Whilst Judith McKenna chief executive of the US-based parent company Walmart said: “Our focus now is continuing to position Asda as a strong UK retailer delivering for customers.

“Walmart will ensure Asda has the resources it needs to achieve that.”

Published at Thu, 25 Apr 2019 13:06:00 +0000