Sainsbury's-Asda merger could reduce food quality, watchdog says

Shoppers could face higher prices, reduced quality and choice, the investigation found
Shoppers could face higher prices, reduced quality and choice, the investigation found

The potential merger between Sainsbury's and Asda could push up food prices and reduce quality, an investigation has found.

Britain’s competition watchdog has provisionally found 'extensive competition concerns' as part of its investigation into the proposed merger.

At this stage in its Phase 2 investigation, the Competition and Markets Authority (CMA) has found that the proposed deal could lead to a worse experience for consumers across the UK through higher prices, a poorer shopping experience and reductions in the range and quality of products offered.

The CMA also has concerns that the merger could lead to a substantial lessening of competition at both a national and local level.

The combined impact means that people could lose out right 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: "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."

Blocking the deal

The CMA has set out potential options for addressing its provisional concerns, these include blocking the deal.

The merging companies could also sell off a significant number of stores and other assets – potentially including one of the Sainsbury’s or Asda brands – to recreate the competitive rivalry lost through the merger.

The watchdog's current view is that it is likely to be difficult for the companies to address the concerns it has identified.

The investigation follows news of the NFU saying the proposed merger could lead to increased pressure on farmers and reduce the choice and innovation of products available for the shopper.

NFU head of food and farming Philip Hambling said that farmers are concerned whether the company can deliver its proposed 10% saving for shoppers without passing this additional pressure on to farmers.

There remains big questions around where the savings are coming from and who is paying the difference. A report released earlier this year highlights how suppliers will bear 70 percent of the brunt of the merger's “efficiencies”.

Both Asda and Sainsbury's now have the opportunity to respond to the analysis set out by the CMA.