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Watchdog report blocks plans to merge Sainsbury's with Walmart-owned Asda

PUBLISHED: 08:12 25 April 2019 | UPDATED: 08:12 25 April 2019

The CMA has blocked a proposed merger between Sainsbury's and Asda outright  Picture: ANTHONY DEVLIN/PA WIRE

The CMA has blocked a proposed merger between Sainsbury's and Asda outright Picture: ANTHONY DEVLIN/PA WIRE

The government's competition watchdog has blocked a proposed merger of supermarket giants Sainsbury's and Asda - which both have stores across the UK including in Suffolk, Norfolk and Essex - after finding it would hit consumers.

An ASDA store in Lowestoft  Picture: GRETA LEVYAn ASDA store in Lowestoft Picture: GRETA LEVY

The Competition and Markets Authority (CMA) said the £12bn deal between the UK's second and third biggest supermarket chains would damage competition and lead to higher prices in stores, online and at petrol stations.

It would also lead to a “substantial lessening of competition” at both a national and local level for shoppers and motorists, who would be “worse off”, it said.

The CMA said the tie-up would lead to price rises, a poorer overall retail experience, or reductions in the quality and range of products.

CMA inquiry chair Stuart McIntosh 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.”

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But Sainsbury's boss Mike Coupe hit back, saying that the decision would lead to £1bn being taken out of customers' pockets.

Sainsbury's and Asda had offered to sell up to 150 stores in order to address competition concerns, and argued shoppers would be deprived of lower prices if the merger were blocked.

“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,” said Mr Coupe.

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

The merger would have created a supermarket titan bigger than the number one biggest chain, Tesco, with revenues of £51bn, with a network of 2,800 Sainsbury's, Asda and Argos stores.

But there were fears suppliers could get squeezed as the merged chain's buying power increased.

It is understood Walmart will continue to look to sell Asda to another buyer.

Walmart boss Judith McKenna said: “While we're disappointed by the CMA's final report and conclusions, 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.”

Asda boss Roger Burnley said he was “disappointed” at the CMA's decision.

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