Sainsbury Argues Regulator Erred in Asda Deal Review

(Bloomberg) -- In their first meeting with the U.K. antitrust regulator since it delivered a hammer blow to J Sainsbury Plc’s planned acquisition of Walmart Inc.’s Asda, the grocers are arguing that officials got their math wrong and were duped about a rival’s intentions.

Sainsbury stepped up its push to salvage the deal on Thursday before the Competition and Markets Authority, which stunned the supermarkets on Feb. 20 by announcing harsher-than-expected findings on the 7.3 billion-pound ($9.6 billion) transaction. The CMA said its initial view was that the deal, even with substantial store divestitures, would likely bring higher prices and worse choice for shoppers.

Sainsbury is arguing that officials made basic counting errors in their analysis of the companies’ store networks, according to people familiar with the situation. The company also says Marks & Spencer Group Plc misled the regulator about a pending online-grocery agreement with Ocado Group Plc that changes the competitive landscape in the supermarket business, according to the people, who asked not to be identified because the matter is private.

The regulator’s analysis would mean that neither Sainsbury nor Asda could locate an outlet within 7 minutes’ drive of the other, the people said, citing calculations by Sainsbury. The deal, which would reshape the British grocery sector by creating the country’s largest supermarket chain, may collapse unless the companies can roll back the CMA’s findings. A spokeswoman for Sainsbury declined to comment.

Coding Error

Sainsbury’s lawyers have argued that the regulators didn’t interrogate rivals sufficiently because Marks & Spencer told them it had no definitive plans to enter online delivered groceries, the people said. One week after the provisional findings were published, M&S announced it was entering a joint venture with e-commerce specialist Ocado.

A spokeswoman for M&S declined to comment, saying “this is a matter for Sainsbury and the CMA.”

The grocers also argued that the regulator’s analysis may have included a coding error that more than doubled the number of gas stations that pose competition concerns, the people said. The watchdog also incorrectly counted some of Asda’s stores, lawyers argued. A spokeswoman for the CMA couldn’t immediately comment.

Sainsbury last month said the regulator had “moved the goalposts” and produced an analysis inconsistent with comparable cases. Chief Executive Officer Mike Coupe said he would “fight right the way through the process,” which runs until the end of April.

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