The competition watchdog has launched its investigation into Sainsbury’s proposed £12billion merger with rival supermarket Asda.
The Competition and Markets Authority (CMA) confirmed today that it is probing the deal and is currently in the ‘pre-notification’ phase where it is gathering information from the two parties before a formal inquiry can begin.
The CMA’s enquiries are expected to focus on areas where the chains have stores in close proximity to each other, and could result in them being forced to sell some shops in order to win its approval.
Deal probe: The competition watchdog has launched its investigation into Sainsbury’s proposed £12bn merger with rival supermarket Asda
It has also issued a preliminary ‘invitation to comment’, which allows interested parties to submit any initial views on the impact that the merger could have on competition.
Rivals such as Tesco and Morrisons will have the opportunity to submit their thoughts on the deal.
The CMA said it is ‘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 assist the CMA’s investigation’.
As a result, the watchdog will likely contact suppliers, competitors, industry bodies and consumer organisations in the coming weeks.
It will use a consumer survey to gather evidence, as well as hearings and meetings with interested third parties.
The CMA added that it will be considering whether the tie-up will result in ‘a substantial lessening of competition’.
The watchdog has set a 5pm deadline on Monday June 4 for its initial information gathering process.
Experts expect the CMA to order the two companies to dispose of scores of stores as part of its review.
The combination of Sainsbury’s and Asda – the second and third biggest players in the UK – will spark one of the biggest shake-ups in the supermarket sector since Morrisons took over Safeway 14 years ago.
Mega move: The combination of Sainsbury’s and Asda will spark one of the biggest shake-ups in the supermarket sector since Morrisons took over Safeway 14 years ago
The tie-up will create the UK’s largest retailer with revenues of £51bn and a network of 2,800 Sainsbury’s, Asda and Argos stores.
Sainsbury’s boss Mike Coupe has said the merger will produce £500million in cost savings and allow the group to further invest in lower prices.
He has also pledged price cuts of 10 per cent for customers and promised no stores will be closed and no jobs will be lost.
Sainsbury’s and Asda announced their plan to merge last month in a move that has raised fears among politicians, competitors and consumer bodies that it will drastically lessen competition.
Competition fears: Yesterday it emerged that Greg Clark, the business secretary, had written to the CMA urging it to look at the implications of the deal for suppliers as well as consumers
Retail consultancy Maximise UK said last week that the watchdog could force Sainsbury’s and Asda to sell up to 245 supermarkets across the UK.
Research by Maximise showed the number of stores at risk is at least six per cent of the company’s combined total, but could increase dramatically depending on how the CMA makes its calculations.
Asda and Sainsbury’s control 26.3 per cent of Britain’s grocery market, according to figures from Kantar Worldpanel, ahead of market leader Tesco’s 24.6 per cent.
Yesterday it emerged that Greg Clark, the business secretary, had written to the CMA urging it to look at the implications of the deal for suppliers as well as consumers.
Complaints over supermarkets’ treatment of farmers and food manufacturers have increased in recent years, leading to the formation of a new watchdog, the Groceries Code Adjudicator in 2013.