UK regulator casts doubt on Sainsbury's-Asda merger

British competition authorities say they have significant concerns about the proposed merger between Sainsbury's and Asda in a preliminary report that that cast doubt on the future of the deal

LONDON -- British regulators say the proposed supermarkets merger between Sainsbury's and Walmart's Asda unit would push up prices and reduce quality for shoppers, casting doubt on a deal that would create the country's biggest grocery chain.

The Competition and Markets Authority, in a preliminary report, said Wednesday it would be "difficult for the companies to address the concerns it has identified" and that a significant number of stores would probably need to be sold before it gains approval.

Stuart McIntosh, chairman of the independent inquiry, says "shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK."

Sainsbury's shares fell over 12 percent. It says it will continue to make its case to regulators who "misunderstand how people shop in the U.K. today."