CMA Concerns

But the CMA, which had previously raised concerns about the deal, said the merger would lessen competition at both a national and local level.

Sainsbury's has more than 1,400 shops in the UK, of which about 800 are convenience stores, while Asda has more than 600.

Stuart McIntosh, chair of the CMA's inquiry group, told the BBC's Today programme: "It's our responsibility to protect the millions of people who shop at Sainsbury's and Asda every week.It would reduce competition in supermarkets and online grocery shopping and at the companies' petrol stations.

"We think that is likely to lead to higher prices or other changes which would be unwelcome to shoppers, such as longer checkout queues."

Earlier this year, Sainsbury's and Asda, which is owned by US retail giant Walmart, promised to sell between 125 and 150 of their supermarkets to allow the merger to proceed, along with some petrol stations and convenience stores.

They also pledged to bring in £1bn of price cuts for consumers if the deal went ahead, and be held to this by an independent guarantor.

Sainsbury's said the CMA had ignored this offer, and misunderstood the potential impact on competition.

But the CMA said it had conducted surveys of 50,000 of the supermarkets' customers.

"Those promises were based on cost savings which we don't think are likely to be realised. Also those price promises are very likely to be difficult to track in practice," Mr McIntosh said.

Catherine Shuttleworth, head of retail analysts Savvy, said that the CMA's claims about the difficulty of tracking prices were "completely unbelievable".

"The more we hear from the CMA the more we should be concerned that they are not working in the best interests of consumers and clearly do not understand the market dynamics of the UK grocery sector."

But Neil Wilson, an analyst at Markets.com, said promises of lower prices after the merger were "absurdly disingenuous".

"The real worry for Sainsbury's is what now? Sainsbury's is the squeezed middle, losing market share to discounters and simultaneously losing out to more premium brands.

"While Aldi and Lidl consistently gain market share and Tesco rebounds, Sainsbury's is feeling the pinch. The worry is that it had no credible plan except this merger."

NFU Director General Terry Jones said: “The NFU’s key concern about the proposed merger has always been the potential impact it could have on our members, with the possibility for abusive market power, as well as the impact on consumer choice and the quality of products coming to the market.

“It is clear from the CMA’s findings that they recognise the impact further consolidation could have on the supply chain, and ultimately shoppers.

“In light of this decision, we will be seeking a meeting with both Sainsbury’s and Asda to fully understand what this decision will mean moving forward.”

Roger Burnley, the Asda boss, said that he was "disappointed" by the CMA's decision.

The deal has now been formally terminated by the companies.