THE PROPOSED merger between supermarket chains Sainsbury’s and Asda has been referred for a full Competition & Markets Authority (CMA) investigation so the watchdog can determine whether the deal would leave customers in “hundreds of local areas” facing higher costs and poorer service.
The CMA began gathering information on the deal after it was announced at the end of April and launched a formal investigation in August.
Having concluded the first phase of that, the watchdog said that as the proposal “raises sufficient concerns” it is being referred for a more in-depth review.
Read more: Sainsbury’s and Asda in talks over £10bn merger
“The companies are two 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,” the CMA said.
“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.”
J Sainsbury chief executive Mike Coupe and Asda chief executive Roger Burnley released a joint statement saying they expected the in-depth review to take place and that they “look forward to engaging with the CMA and panel on this next phase of the process”.
The investigation was welcomed by the Federation of Small Businesses, with chairman Mike Cherry saying it is right to identify the impact the deal could have on suppliers.
Read more: Sainsbury shares surge as Asda deal unveiled
“It is vital that the executives at the very top of the two supermarkets can explain how the merger can take place without giving the merged chain increased buyer power over suppliers which would negatively impact the smaller firms in their supply chains,” he said.
“We would hope that this investigation by the CMA will be able to produce cast-iron guarantees that there will be a positive relationship with small suppliers.”
However, Russ Mould of investment firm AJ Bell warned that the outcome of the investigation could prove so onerous that it would negate the benefits of joining forces in the first place.
“Ultimately the risk is the combination could be blocked or given the go ahead with such onerous conditions, such as selling lots of stores for example, that it would begin to undermine the whole rationale for the merger,” he said.
The CMA, which will be consulting with customers, rival retailers, suppliers and industry groups, will issue its final report on the deal in March 2019.
Meanwhile Tesco, whose March 2018 acquisition of wholesaler Booker was also the subject of a full CMA investigation, has launched into the budget space in a bid to beat off competition from low-cost German retailers Aldi and Lidl.
Read more: Sainsbury's and Asda merger 'poses risk' to 1000 Scottish jobs
Tesco chief executive Dave Lewis said that the Jack’s chain, which is named after Tesco founder Jack Cohen, will offer customers “great tasting food at the lowest possible prices”.
The first two Jack’s stores have launched in Chatteris in Cambridgeshire and Immingham in Lincolnshire, with a total of between 10 and 15 expected to open across the UK in the next six months.
Tesco’s £3.7 billion acquisition of wholesaler Booker went live earlier this year after being cleared by the CMA last December.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here