Asda's purchase of Co-op petrol stations raises CMA concerns

The merger between Asda and the Co-op’s petrol stations and attached grocery stores could lead to higher prices for motorists and shoppers, the Competition and Markets Authority (CMA) announced on Tuesday.

In an investigation, the competition regulator said it found that the acquisition of 132 petrol forecourt sites by Asda raised competition concerns in 13 locations across the UK, where the merging businesses currently competed for customers.

The CMA said it found that allowing Asda to acquire more sites in such areas could mean higher prices or less choice for customers, as the merger would leave Asda facing insufficient competition.

Asda argued that the merger would enable it to bring its low-cost pricing model to more customers, but the CMA’s investigation focussed on local areas in which the merging businesses currently competed for customers, where competition concerns arose only in areas in which Asda was already an important option for customers.

The CMA said its phase one investigation into the completed acquisition by Asda of Arthur Foodstores, the company set up by Co-op to sell its petrol forecourt sites, began in January.

It focussed on a number of local areas where Asda and the Co-op sites that it acquired competed to provide fuel or groceries to customers.

Consumers and businesses in the 13 affected areas could face higher prices or lower quality services when shopping or buying fuel if the merger continued without conditions being imposed to address competition concerns, the regulator explained.

The CMA said it would now move to a phase two investigation to consider whether any remedies would be required to address the concerns identified.

“Groceries and fuel account for a large part of most household budgets,” said the CMA’s senior director of mergers, Colin Raftery.

“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.

“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.”

The CMA said Asda now had five working days to offer legally binding proposals to the CMA to address the identified concerns.

After that, the CMA would have a further five working days to consider whether the proposals addressed its concerns, or if the case should be referred to an in-depth phase two investigation.

Reporting by Josh White for Sharecast.com.