It is not the job of the Competition and Markets Authority (CMA) to throw a protective arm around moribund businesses unable to adapt to changing competitive conditions.

However, Asda and Sainsbury’s are not grocery’s equivalent of two drunks propping each other up in retail’s saloon bar.

Their proposed merger was not an appeal for a helping hand but could have kept up the pace of competition to the benefit of shoppers through, for instance, efficiencies and lower prices. The CMA was surely wrong to kibosh the deal.

How many people in retail would really agree with this conclusion from the CMA – that a tie up would likely lead to “price rises, reductions in the quality and range of products available, or a poorer overall shopping experience”?

If that happened, the merged business would be signing its own death warrant.

“The fact that Asda and Sainsbury’s were willing to consider linking up is stark evidence that the market is not monolithic”

No food retailer could afford to take its position for granted in such a way. It would play straight into the hands of rising powers such as Aldi and Lidl, which have shaken up grocery retail through their commitment to low prices and quality product.

Aside from that, the sort of outcomes feared by the CMA are at odds not just with grocery trends of the moment, but with the evidence over decades.

Asda, Sainsbury’s, Morrisons and Tesco have transformed the lives of consumers by lowering prices, extending choice and improving standards since before many of their customers were born.

In 1957, ONS data shows, food ate up 33% of family spend. In 2017, it was only 16%.

That’s testament in part to the impact of the big grocers. After all, it was back in 1950 when Sainsbury’s opened its first self-service store. It was one of the earliest in the UK and a frontrunner in a trend that brought down prices. Although, no doubt, some shoppers would have thought it “a poorer overall shopping experience”.

Market transformation

But while the big four may have shaped the landscape, they do not own it, as the ascent of disrupters Aldi and Lidl demonstrates.

The fact that Asda and Sainsbury’s were willing to consider linking up, resulting in a big three, is stark evidence that the market is not monolithic. They aimed not to leg over the consumer, but to compete better on the shopper’s behalf.

The need for them to do just that is writ large in market share data. The latest figures from industry monitor Kantar showed a record market share of 8% for Aldi, where 13 million households shopped over the 12 weeks to March 24 – that’s more customers than Morrisons had during the same period.

“There are legitimate questions about whether a tie-up would have been executed well enough to come good on its promise”

There is more change to come. Marks & Spencer’s deal with Ocado will allow it to compete in the online food market for the first time, and it has ambitions to “transform online grocery shopping for UK consumers”.

That’s what Sainsbury’s chief executive Mike Coupe aimed to do, too. When he unveiled the proposed link-up with Asda he maintained: “This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future.”

After today’s decision, Coupe insisted: “The CMA’s conclusion that we would increase prices post-merger ignores the dynamic and highly competitive nature of the UK grocery market. The CMA is today effectively taking £1bn out of customers’ pockets.”

Waves of change

There are legitimate questions to be asked about the extent to which Sainsbury’s and Asda really had a handle on the likely reaction of the CMA to a merger.

There are also legitimate questions to be asked about whether a tie-up, had it gone ahead, would have been executed well enough to come good on its promise – so many deals in so many industries, not just retail, have proved less transformative than was hoped.

But on a “balance of probabilities”, which is the basis on which the CMA weighed up all the evidence it gathered, it is hard to see how a deal would have resulted in substantially lower competition. It might not even have saved the pair from coming under further competitive pressure.

The waves of change continue to break over UK grocery, but the CMA has chosen to play Canute.