Sainsbury’s-Asda merger investigated by CMA

Sainsbury’s-Asda merger investigated by CMA

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Britain’s competition regulator has confirmed it is investigating the planned merger between Sainsbury’s and Asda.

The Competition and Markets Authority (CMA) said it was inviting interested parties to comment on the impact of the deal ahead of a formal “phase one” inquiry.

A deal between Sainsbury’s and Asda, currently the second and third biggest UK supermarkets, would create a grocery powerhouse, overtaking Tesco as the market leader.

It would have 2,800 stores across the UK – including the Argos business already owned by Sainsbury’s – with combined revenues of £51bn.

Some experts think the CMA could ultimately order the company to dispose of at least 75 stores.

There are also concerns about the impact the tie-up would have on suppliers – and this part of the sector is included in the body’s call for evidence.

Business Secretary Greg Clark has reportedly written to the head of the CMA to express his view that when assessing the merger it ought to take account of the “possible impact on the supply chain”.

The regulator said its “invitation to comment” issued on Friday was the first part of its information gathering process, in advance of the formal investigation starting.

“The CMA is also likely to proactively contact companies and organisations that are active in the markets affected by the proposed merger, or have valuable insights or evidence that could affect the CMA’s investigation,” it said.

These could include suppliers, competitors, industry bodies and consumer organisations.

The purpose of the investigation is to discover whether the merger could “result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services”.

Once a first formal phase of the investigation is complete the CMA would have to decide whether to move to a more protracted “phase two”.

Depending on its conclusions, the enlarged business might have to dispose of stores, or the deal could even be blocked.

The merger, agreed last month, will see Leeds-based Asda valued at £7.3bn, with current US owner Walmart paid £3bn and taking a 42% stake in the combined business.

Executives have said there are no plans to close stores under the deal, which is expected to deliver operational savings of £500m.

The companies say customers will see benefits including price cuts of 10% on many of the products that customers buy regularly.

They plan to maintain both supermarket brands.

Labour MP Rachel Reeves, chair of the Business, Energy and Industrial Strategy committee, welcomed the competition watchdog’s announcement.

She said: “The CMA is right to investigate this potential merger between two powerful supermarket players.

“It’s vital that the CMA examines closely the impact on consumer choice on jobs.

“It’s also important that the effects on the supply chain are looked at as small suppliers to supermarkets are already under pressure on prices.”

(c) Sky News 2018: Sainsbury’s-Asda merger investigated by CMA