CMA Launches In-Depth Review of Sainsbury's-Asda Merger

The Competition and Markets Authority (CMA) has referred the planned £12bn Sainsbury’s / Asda merger for an in-depth Phase 2 investigation.

In August, the Competition and Markets Authority (CMA) opened its initial (Phase 1) investigation into the merger and announced the companies had requested a ‘fast-track’ referral to Phase 2.

The CMA has now confirmed, through its Phase 1 investigation, that the deal raises sufficient concerns to be referred for a more in-depth review. The companies are 2 of the largest grocery retailers in the UK and their stores overlap in hundreds of local areas, where shoppers could face higher prices or a worse quality of service.

These concerns will be considered further in the Phase 2 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 Phase 2 investigation is a more in-depth review, led by an inquiry group chosen from the CMA’s independent panel members. This will be chaired by Stuart McIntosh, with the other members being Roland Green, John Thanassoulis, Richard Feasey and Claire Whyley. The group will gather evidence – in particular through multiple customer surveys and engagement with other retailers, suppliers and industry bodies – to inform its detailed analysis.

Investigations undertaken to date suggest that 463 local areas would be affected by a substantial lessening of competition (SLC) due to the overlap of existing Asda and Sainsbury's stores, which could force the two retailers to sell off numerous branches.

For the second phase, Sainsbury's and Asda have called on the CMA to include Aldi and Lidl in its calculations of risk to competition, as these retailers were not taken into consideration during the initial phase.

In a statement, Sainsbury's and Asda said:"The grocery market has changed significantly in the last decade and is more competitive than ever, with the rise of discount formats, online grocery and food delivery businesses.

"We look forward to working with the CMA on the Phase 2 inquiry, where we expect it to conduct a full review of the market and take these changed market dynamics into consideration."

The deal would create chain with revenues of £51bn a network of 2,800 Sainsbury's, Asda and Argos stores.

Source : Insight DIY Team and CMA

Image : JuliusKielaitis / Shutterstock.com

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