Uncertainty with Brexit and little growth in its own corridors, the chains have been looking for new sources of income. The announcement was made in April 2018 by the possible merger between Sainsbury`s and Asda, sparking a hype around the biggest possible upheaval in the UK food retailing industry since Morrison`s acquisition of Safeway in 2004. The most pressing question is: what impact will this duopoly have on the food ecosystem? Despite what the retailers claim, asda, parent company Walmart and Sainsbury`s agreed to terminate the deal after the CMA`s decision. Previously, they had criticised regulators for not understanding the market dynamics of the UK food sector and said they had been treated unfairly. There is concern about the impact this will have on the food ecosystem, as the transaction would result in brands holding a 30% market share. What would be the impact of this control on the end consumer and suppliers? Brands explained that they could use their purchasing power and ultimately reduce costs to consumers. However, the CMA believes that its control over suppliers could have negative effects on buyers who may experience higher prices for items in other retail stores. The result would be that suppliers would have to offset prices when selling to their competitors in order to offset their losses in negotiations with Asda and Sainsbury`s. The CMA also believes the agreement could result in excessive fuel costs at more than 100 sites where the Sainsbury and Asda gas stations overlap.
The CMA is the UK`s leading competition and consumer authority. It is an independent non-ministerial government authority, which investigates mergers, markets and regulated industries, as well as the enforcement of competition law and consumer protection. For CMA updates, follow us on Twitter, Facebook and LinkedIn. The proposed merger of Sainsbury`s and Asda is one of the largest mergers in british retail history. But if it were to be approved by the CMA, what would be its legal implications? We spoke to an expert to find out. Many market participants had opposed the proposed merger when the CMA`s preliminary results were published in February 2019. The Food and Drink Federation found that a highly competitive food retail business was in the best interest of food and beverage manufacturers.