On Thursday, Britain's Competition and Markets Authority (CMA) stated that it would not approve the merger in light of its potentially adverse effects on consumers who would be faced with higher prices as a result of lower competition.
Sainsbury was forced to drop the $9.4 billion bid to buy Asda soon after. Walmart would have had a 42% stake in the deal, which would have made the new company Britain's largest grocery chain and endowed it with enough scale to lower costs.
"The CMA's conclusion that we would increase prices post-merger ignores the dynamic and highly competitive nature of the U.K. grocery market," Sainsbury Chief Executive Officer Mike Coupe said in a statement. "The CMA is today effectively taking 1 billion pounds out of customers' pockets."
Much of Sainsbury's future success was riding on this deal, especially given that the company does not have the same buying power as market leader Tesco, and cannot match the prices of wholesalers like Aldi and Lidl.
"It's our responsibility to protect the millions of people who shop at Sainsbury's and Asda every week," said Stuart McIntosh, who led the CMA investigation. "We have concluded that there is no effective way of addressing our concerns, other than to block the merger."
"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 U.K. shoppers," he continued.
While the option to sell Asda to a private equity firm still exists for Walmart, company executives believe the former is not a problem business and can still succeed on its own. In fact, Asda seems to have taken over Sainsbury as the number two grocery retailer in Britain, locking down a 15.4% market share.
"Our focus now is continuing to position Asda as a strong U.K. retailer delivering for customers," said Judith McKenna, head of Walmart's international arm. "Walmart will ensure Asda has the resources it needs to achieve that."