Shares in Sainsburys dropped by 12.89% in early trading this morning (20 February), after the CMA said 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”.
It added that prices could rise at a large number of Sainsbury’s and Asda petrol stations, as well as concerns that the merger could lead to a “substantial lessening of competition” at both a national and local level.
The CMA said the combined impact means people could “lose outright” 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, said “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.”
However, a spokesperson for Sainsbury’s and Asda said the findings “fundamentally misunderstand how people shop in the UK today” and the “intensity of competition in the grocery market”, adding the CMA has “moved the goalposts and its analysis is inconsistent with comparable cases”.
The spokesperson added: “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 press our case in the coming weeks.”