The proposed merger between Sainsbury’s and Asda suffered a blow today (20 February) as the Competition and Markets Authority (CMA) found that it could push up prices and reduce quality.

In phase 2 of its investigation, the CMA said the deal could lead to a worse experience for in-store and online customers across the UK through higher prices, a poorer shopping experience and reductions in the range and quality of products offered.

It added that the merger could lead to a ‘substantial lessening of competition’ at both a national and local level, particularly in areas where Sainsbury’s and Asda stores overlapped.

The deal was first mooted in April 2018 with the businesses claiming it would lead to a “more competitive and resilient business” that would be better able to invest in price, quality, range and technology, offering customers a more flexible way to shop.

 “These are two of the biggest supermarkets in the UK, with millions of people purchasing their products and services every day. 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,” said Stuart McIntosh, chair of the independent inquiry group carrying out the investigation.

In response, a spokesperson for Asda and Sainsbury’s said the provisional findings “fundamentally misunderstand” how people shop in the UK and the intensity of the competition in the grocery market.

“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.”

The companies, and others, now have the opportunity to respond to the CMA’s analysis by 13 March 2019. However, the CMA’s current view is that it is likely to be difficult for the companies to address the concerns it has identified. The Authority will issue its final report on 30 April 2019.