• Sunday, June 16, 2024

Business

Asda’s purchase of Co-op forecourts could increase prices, regulator rules

The Competition and Markets Authority opened its initial investigation in January

Zuber (left) and Mohsin Issa.

By: Pramod Thomas

THE Competition and Markets Authority (CMA) has ruled that Asda’s purchase of 132 petrol stations and attached grocery stores from the Co-op could mean higher prices or less choice for motorists or shoppers in 13 areas.

The regulator in January opened its initial, Phase 1 investigation into the completed acquisition by Asda of Arthur Foodstores Limited, a company set up by Co-op to sell its 132 petrol forecourt sites.

Asda is owned by British Indian billionaire brothers Mohsin Issa CBE and Zuber Issa CBE.

The CMA said its 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 customers, adding 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 deal could therefore lead to consumers and businesses in these areas facing higher prices or lower quality services when shopping or buying fuel, it noted.

“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,” Colin Raftery, CMA senior director of mergers, said.

“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 told the CMA that competition concerns would not arise in these areas because the merger would enable Asda to bring its low-cost pricing model to more customers. But the CMA noted that competition concerns only arise in areas in which Asda is already an important option for customers, who already have access to Asda prices.

The CMA found that allowing Asda to acquire more sites in those areas, leaving it facing insufficient competition in future, could therefore risk worse outcomes for customers.

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 these proposals address its concerns, or if the case should be referred to an in-depth, Phase 2 investigation.

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