Sainsbury’s-Asda CMA investigation begins

The Competition and Markets Authority (CMA) has launched the first phase of its investigation into the proposed merger between Sainsbury’s and Asda.

The proposed group would operate around 2,800 stores, including Argos, Habitat and George. However, it was suggested last week that the proposed merger would lead to a reduction of 300 stores across the UK.

The CMA will investigate whether the Sainsbury’s-Asda deal result in higher prices, less choice or worse service for consumers, and whether it could directly affect prices for suppliers. Sainsbury’s and Asda have both requested that the CMA fast-track its Phase 1 investigation to move onto the more in-depth Phase 2 investigation.

Commenting on the enquiry. CMA chief executive Andrea Coscelli said: “About £190bn is spent each year on food and groceries in the UK so its vital to find out if the millions of people who shop in supermarkets could lose out as a result of this deal.

“We will carry out a thorough investigation to find out if this merger could lead to higher prices or a worse quality of service for shoppers, and will not allow it to go ahead unless any concerns we find are fully dealt with.”

When the proposed merger was first announced, wholesalers were quick to respond. Landmark Wholesale MD John Mills said: “If this deal goes through, it will create a retail entity that will have a 31% share of the UK grocery shopping basket. This, combined with Tesco’s 28% share, means that two grocery retailers will have more than a 50% share of consumers’ spend. This clearly leads to less choice for the shopper and increased pressure for suppliers.

“A very real concern is that Sainsbury’s CEO Mike Coupe has talked openly of his mission to cut prices by 10%. While the discounters will still be substantially cheaper, this message will undoubtedly send shivers down the spine of suppliers who are already facing increased pressure from higher costs and the weaker pound. But, crucially, this is very scary news for independent, family-run retailers who will find it impossible to compete.

“While short term, the Sainsbury’s/Asda deal signifies lower prices for the shopper, medium to long term this can only lead to less choice as other retailers go out of business which then reduces consumer choice.”

The CMA has spent the past few months gathering information to start Phase 1, and is now inviting the general public to submit their views on how the merger could affect competition by 31 August. This can be done here: https://www.gov.uk/cma-cases/j-sainsbury-plc-asda-group-ltd-merger-inquiry#invitation-to-comment-closes-31-august-2018