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Sainsbury’s Asda merger blocked by CMA

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The proposed merger by Sainsbury’s and Asda has been blocked by the Competition Market Authority (CMA), over fears that prices would rise.

The CMA has said supermarket prices would be raised with longer checkout queues and raised prices at petrol stations.

A disappointed Roger Burnley, the chief executive of Asda said, “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.”

Mike Coupe, Sainsburys 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.”

However, Stuart McIntosh, chair of the CMA’s inquiry group 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.”

Clive Black, analyst at Shore Capital said of the CMA’s decision to block the move, “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.

“At the heart of the proposed deal’s problems is an incorrect and over-extrapolation of the decision by the CMA, under a different managerial regime, to unconditionally clear the Tesco-Booker merger. We felt at the time that it was a surprising and poor decision.

“However, rather than analysing matters with a sense of rationality and perspective, Sainsbury and Asda seem to have decided that 1+1 can equal 10.”

Caroline Normand, Which? director of advocacy said, “The CMA is right to block this merger, which could have reduced competition in the sector resulting in a number of problems for shoppers including increased prices, reduced quality and choice, and a poorer shopping experience.

“Sainsbury’s and Asda have fallen behind the pack recently in this trusted sector, with both finishing in the bottom four of our annual supermarket survey as rivals like Aldi and Lidl have done a better job of giving shoppers what they want.”

Neil Wilson, chief market analyst at Markets.com said, “The merger never looked like it would pass the CMA’s tests, however fickle the regulator may seem post Tesco-Booker.

“Mike Coupe remains absurdly disingenuous. ‘The specific reason for wanting to merge was to lower prices for customers,’ he said today in reply. No one, least of all the CMA, fell for it. Will Coupe stay? I doubt it, this could well be the time for Coupe to exit.”




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