Further reaction: Sainsbury’s and Asda mega-merger blocked

Sainsburys said that the decision effectively takes a billon pounds out of customers pockets. Picture: Getty Images

The competition watchdog has blocked Sainsbury’s £12 billion mega-merger with rival Asda on the grounds that it would lead to higher prices for consumers and hit competition.

Publishing its final report into the deal, the Competition and Markets Authority (CMA) argued that the tie-up would lead to increased prices in stores, online and at petrol stations across the UK.

Shoppers and motorists would be “worse off” if Sainsbury’s and Walmart-owned Asda were to merge, the CMA noted, adding that a merger would lead to price rises, reductions in the quality and range of products or a poorer overall retail experience.

The watchdog claimed that the deal would have resulted in a “substantial lessening of competition” at both a national and local level for people shopping in supermarkets.

Stuart McIntosh, chairman of the CMA inquiry group, said: “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.”

Sainsbury’s chief executive Mike Coupe said that the decision effectively takes £1bn out of customers’ pockets.

Prior to the CMA decision, Sainsbury’s and Asda had offered to sell up to 150 stores as part of efforts to address competition concerns, and claimed that shoppers would be deprived of lower prices should it be blocked.

Coupe 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.”

Sainsbury’s, Walmart and Asda have now mutually agreed to terminate the transaction.

Analysts at Shore Capital noted: “Well, the referee has now blown the whistle on a deal that we give credit to its architect(s) for being bold but were set against a strategy and tactics that were most certainly not of a mould of the likes of Sir Alex Ferguson.

“Indeed, arrogance and naivety are words that come to mind when considering this proposed amalgamation from start to finish.”