SAINSBURY’S boss Mike Coupe accused regulators of taking “£1 billion out of shopper’s pockets” after a merger with Asda was blocked.

The Competition and Markets Authority (CMA) said the deal would lead to increased prices at checkouts at petrol stations across the UK, with online bills also bumped up.

The watchdog claimed the move would have resulted in a “substantial lessening of competition” at both a national and local level, leaving consumers “worse off”.

Stuart McIntosh, chairman of the CMA inquiry group, said: “It’s our responsibility to protect the millions of people who shop at Sainsbury’s and Asda every week.

“Following our in-depth investigation, we have found this deal would lead to increased prices, reduced quality and choice of products, or a poorer shopping experience for all of their UK shoppers.

“We have concluded that there is no effective way of addressing our concerns, other than to block the merger.”

Prior to the decision, Sainsbury’s and Walmart-owned Asda had offered to sell up to 150 branches as part of efforts to address competition concerns, and claimed shoppers would be deprived of lower prices should it be blocked. But the CMA said it found 537 areas where there could be a substantial reduction in competition in supermarkets.

The companies had also pledged to make a number of post-merger commitments, had the deal been approved, including an annual £1 billion investment in lowering prices by the third year of the deal completing, equating to a 10% cut on everyday items.

Coupe said: “The specific reason for wanting to merge was to lower prices for customers. 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 £1 billion out of customers’ pockets.”

Sainsbury’s, Walmart and Asda have now mutually agreed to terminate the transaction.

A merger between the duo, the UK’s number two and three supermarkets, would have created a supermarket titan bigger than Tesco with revenues of £51bn and a network of 2800 Sainsbury’s, Asda and Argos stores.

But fears had been expressed that suppliers could get squeezed as a result, with the tie-up giving the merged entity increased buying power.

It is understood that Walmart will look to sell Asda to another buyer.

Walmart chief executive Judith McKenna said: “While we’re disappointed by the CMA’s final report and conclusions, our focus now is continuing to position Asda as a strong UK retailer delivering for customers. Walmart will ensure Asda has the resources it needs to achieve that.”

Tim Roache of GMB, the trade union for ASDA workers, said: “For Asda workers, this is the right decision after the CMA’s provisional findings. Swathes of stores and depots would have to have been sold off, with jobs put at risk and no real benefit for customers or communities. The workforce has been through months of uncertainty, worrying about what’s going to happen and wondering if their stores or depots would be sold from under them.

“It’s time for Asda to move on, and to give some stability and security to the staff who work day in, day out to make the company profitable.”