Good news today for the independent forecourt sector as the Competition and Markets Authority (CMA) confirmed its blocking of the merger between supermarket giants Sainsbury’s and Asda, after finding it would lead to increased prices at many petrol stations across the UK.
PRA chairman Brian Madderson had warned last month that the proposed measures to save the struggling merger between Sainsbury’s and Asda would put thousands of independent petrol retailers out of business and decimate consumer choice across the UK, particularly in rural areas. He made representations to the CMA regarding Sainsbury’s proposal to cap retail fuel margins for a period of five years in a late attempt to win over the regulator.
He welcomed the news that, following an in-depth investigation, a group of independent CMA panel members concluded that the deal would result in a substantial lessening of competition at both a national and local level for people shopping in supermarkets.
“The PRA welcomes the news that the CMA has blocked the proposed merger between Sainsbury’s and Asda, over fears it would raise prices at the supermarkets’ petrol stations," said Madderson.
“This move would have been inconsistent with the CMA’s policy of seeking structural changes as opposed to behavioural changes. With hundreds of Sainsbury’s filling stations across the UK, it would have proved very costly and difficult to enforce a margin cap in a way that was properly transparent.
“We believe Sainsbury’s proposed solution could have caused long term damage to the UK’s fragile refuelling network.”
Stuart McIntosh, chair of the inquiry group, said: "It’s our responsibility to protect the millions of people who shop at Sainsbury’s and Asda every week. Following our in-depth investigation, we have found this deal would lead to increased prices, reduced quality and choice of products, or a poorer shopping experience for all of their UK shoppers.
"We have concluded that there is no effective way of addressing our concerns, other than to block the merger."
The CMA’s investigation found that it would lead to motorists paying more at over 125 locations where Sainsbury’s and Asda petrol stations are located close together. In addition, as well as affecting in-store customers, the merger would result in increased prices and reduced quality of service, such as fewer delivery options, when shopping online.
In making the decision to prohibit the merger, the Group reviewed a wide range of issues in detail, such as the increased competition presented by discount stores like Lidl and Aldi, and how new or expanding competitors could affect the retail market, including online. While the panel carefully considered these industry developments, they did not allay its serious competition concerns about the merger.
The Group also carefully reviewed the companies’ statement that they would cut some prices. However, detailed analysis of the impact of the deal clearly showed that, overall, the merger would reduce competition in the market and would more likely to lead to price rises than price cuts.
This final decision to block the deal follows the publication of the CMA’s provisional findings and a subsequent consultation period, during which the CMA reviewed responses from a variety of interested parties, including Sainsbury’s and Asda themselves.