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Asda and Sainsbury's 'badly misjudged' competition watchdog after proposed merger is blocked

  • Video report by ITV News Business and Economics Editor Joel Hills

A year ago the tie-up between Asda and Sainsbury’s was presented as one in which everyone would emerge better off: shoppers, shareholders, suppliers and staff.

But the Competition and Markets Authority has come to a very different conclusion, deciding the merger would in fact lead to higher prices, less choice, poorer service and should not be allowed to proceed under any circumstances.

The plan to merge was audacious and was always going to be a gamble.

Asda and Sainsbury’s decided that, on balance, it would probably fly but they badly misjudged the CMA’s thinking.

Sainsbury’s chief executive, Mike Coupe, is now under intense pressure. Credit: PA

Sainsbury’s promise to cut prices by £1 billion over next 3 years was deemed "vague" and "not credible".

The argument that Aldi and Lidl are now big enough to act as significant rivals to a newly-merged "Sasda" was dismissed.

The CMA decided the discounters don’t have the range of a major supermarket or its online reach.

Sainsbury’s chief executive, Mike Coupe, was the cheerleader for the project and has been criticised for not spotting the level of resistance it would encounter.

It hasn’t helped that in the twelve months it has taken the CMA to scrutinise the merger Sainsbury’s performance has worsened.

"The heat is on Mike Coupe," argues Patrick O’Brien from Globaldata.

"He appears to have wasted a year chasing the impossible dream while his competitors took advantage of its distraction," he added.

It is the first major CMA decision since the appointment of former Tory MP Andrew Tyrie as chairman. Credit: PA

Sainsbury's insists that Coupe has the full support of both the new chairman and the wider board. It accuses the CMA of ignoring the evidence and maintains that blocking the merger is effectively "taking £1 billion out of customers’ pockets".

Sainsbury’s shareprice fell today as the company and Asda jointly admitted defeat.

The problem was that, while the benefits of the tie-up to investors were obvious, the CMA could see nothing in this for shoppers.