Mat Hughes and Ben Forbes authored a chapter in International Comparative Legal Guides Merger Control 2020 on the Competition and Markets Authority’s (CMA) decision to prohibit the merger of Sainsbury’s and Asda. They discuss the CMA’s unprecedented low threshold for intervention and what retailers facing challenging market conditions can expect when considering future mergers.
"At a superficial level, the CMA’s prohibition decision was unsur- prising. The groceries sector has been subject to many merger control investigations, with Tesco, Asda and Sainsbury’s all being prohibited from acquiring a much smaller Safeway in 2003.
Similarly, the CMA’s use of so-called “pricing pressure” tests to assess whether the merged business would have an incen- tive to increase prices, or worsen quality, range or service (commonly abbreviated to PQRS) locally or nationally is unsur- prising. Indeed, UK competition authorities have used pricing pressure tests for many years, going back to the Competition Commission’s (CC) 2005 Somerfield/Wm Morrison decision."