Sainsbury’s and Asda’s proposed merger will receive further scrutiny after the Competition and Markets Authority (CMA) said concerns over the deal merit deeper investigation.
The watchdog warned that the two supermarkets “overlap in hundreds of local areas”, meaning shoppers could face higher prices or worse service if the two were to merge, after its phase one investigation found the tie-up “raises sufficient concerns” for the probe to continue.
“These concerns will be considered further in the phase two investigation, along with other issues raised so far with the CMA – including those relating to fuel, general merchandise (such as clothing) and increased buyer power over suppliers,” the CMA said.
Sainsbury’s wants to acquire its competitor in a £7.3bn deal that would shrink the number of supermarkets in the UK.
Sainsbury’s and Asda each hold just over a 15 per cent share of the UK supermarket industry, according to Kantar Worldpanel figures released this month.
Together the British supermarkets would command almost £1 in every £3 spent on groceries.
Mike Coupe, group chief executive of Sainsbury's, and Roger Burnley, president and chief executive of Asda, said: "We expected the CMA would want to undertake an in-depth review and look forward to engaging with the CMA and panel on this next phase of the process.”
The CMA’s second phase will see its independent panel members gather evidence through customer surveys, discussions with rival retailers, suppliers and industry bodies.
It has a statutory deadline of 5 March to reach a decision.