After completing its initial investigation, the Competition and Markets Authority (CMA) has raised concerns that Asda’s purchase of 132 petrol stations and attached grocery stores from the Co-op could lead to higher prices or less choice for consumers in several areas of the country.
The regulator began a Phase 1 probe of the deal in January this year, three months after Asda completed the £438m acquisition as part of a strategy to grow its presence in the convenience channel.
The CMA’s investigation focused on a number of local areas in which Asda and the Co-op sites that it acquired compete to provide fuel or groceries to consumers. The watchdog found that the deal raises competition concerns in 13 locations across the UK, in each of which the merging businesses currently compete for customers and would not face sufficient competition after the merger. The CMA noted that the deal could therefore lead to consumers and businesses in these areas facing higher prices or lower quality services when shopping for groceries or buying fuel.
Asda is said to have told the CMA that competition concerns would not arise in these areas because the merger would enable the supermarket retailer to bring its low-cost pricing model to more consumers. But as the investigation focussed on local areas in which the merging businesses currently compete for customers, the CMA stated that competition concerns only arise in areas in which Asda is already an important option for shoppers, who already have access to Asda prices. The CMA highlighted that allowing Asda to acquire more sites in those areas, leaving it facing insufficient competition in future, could therefore risk worse outcomes for consumers.
“Groceries and fuel account for a large part of most household budgets. As living costs continue to rise, it’s particularly important that deals that reduce competition among groceries and fuel suppliers don’t make the situation worse,” said Colin Raftery, CMA Senior Director of Mergers.
“While competition concerns don’t arise in relation to the vast majority of the 132 sites bought by Asda, there’s a risk that customers could face higher prices or worse services in a small number of areas where Asda would face insufficient competition in either groceries or fuel after the deal goes through”.
Asda now has five working days to offer legally binding proposals to the CMA to address the competition concerns identified. The CMA would then have a further five working days to consider whether the proposals address its concerns or if the case should be referred to an in-depth, Phase 2 investigation.
Responding to the CMA’s ruling, Mohsin Issa, co-owner of Asda, said: “We look forward to working constructively with the CMA over the coming days as we consider their findings. We remain committed to our long-term strategy to build a convenience business and bring Asda’s great value in fuel and groceries to more customers and communities throughout the UK.”
Asda recently reached the 100-store milestone for its ‘On the Move’ forecourt convenience format developed with the EG Group. It has plans to open a further 100 sites across the UK this year.
Asda is also expanding its presence in the convenience market through its new Express format, which launched before Christmas with the opening of standalone stores in Sutton Coldfield and Tottenham Hale. The supermarket is planning to open 300 Asda Express stores by the end of 2026 in urban and residential locations.
NAM Implications:
- To avoid further time spent…
- …a no-brainer route for Asda would be to sell/close the 13 sites concerned, ASAP.
- And suppliers should work on that basis.
