The UK’s Competition and Markets Authority (CMA) has launched a formal investigation into the proposed merger between UK supermarkets Sainsbury’s and Asda, following months of evidence gathering.
Both supermarkets agreed to merge earlier this year, after Sainsbury’s agreed to pay Asda-owner Walmart £2.975 billion in cash in return for a 42% stake in the enlarged business, and the CMA’s probe will investigate whether a combined business would negatively affect UK consumers.
Concerns about the deal have been raised by UK lawmakers, MPs and suppliers, who claimed that a merged business could raise prices or reduce service quality due to a lack of competition in the market.
The CMA’s investigation will consider whether the deal will lead to less choice and higher prices across the product ranges of both businesses, and will also investigate whether a merged business could use its increased buying power to squeeze suppliers.
Estimates from Kantar Worldpanel claim that the combined business would boast annual revenues of £51 billion and account for a combined share of 31.4% of the UK grocery market, larger than rival Tesco’s 27.6% share.
The investigation is currently in ‘Phase 1’, though both Sainsbury’s and Asda have requested that the CMA immediately moves onto the ‘Phase 2’ through the CMA’s fast-track process, which applies when it is clear from an early stage that a deal requires an in-depth investigation.
A statement from the CMA indicated that it would accept this request, unless there was a valid objection to the use of the fast-track process.
Andrea Coscelli, chief executive of the CMA, said: “About £190 billion is spent each year on food and groceries in the UK so it’s 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.”
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