The Competition and Markets Authority (CMA) is referring the proposed merger between Sainsbury’s and Asda for a further “in-depth investigation”.
The CMA confirmed on Wednesday, having completed its Phase 1 investigation into the proposed merger, that the deal “raises sufficient concerns” to be referred for a more in-depth review.
The competition watchdog pointed out that the companies are two of the largest grocery retailers in the UK, with overlapping stores in hundreds of local areas, “where shoppers could face higher prices or a worse quality of service”.
The CMA said that the “Phase 2 investigation” will be a more in-depth review, led by an inquiry group chosen from the authority’s independent panel members.
The group will gather evidence around the proposed merger, through multiple customer surveys and engagement with other retailers, suppliers and industry bodies to inform its detailed analysis, the CMA said.
A detailed statement, setting out the issues that the inquiry group expects to investigate, will be published in the coming weeks.
The CMA added that members of the public and other interested groups will then be invited to give their views on the investigation, which is expected to be completed by 5 March 2019.
A deal between Sainsbury’s and Asda, currently the second and third biggest UK supermarkets, would create a grocery powerhouse, overtaking Tesco as market leader.
The merged group would have 2,800 stores across the UK – including the Argos business already owned by Sainsbury’s – with combined revenues of £51bn.
The supermarket chains, which plan to maintain both of their existing brands, have said that the pact would allow them to pass on a 10% reduction in costs to shoppers.
Sainsbury shares opened up 0.3%.
Last month the watchdog warned that it will block the proposed merger between the giant retailers if the deal looked like it would leave shoppers worse off.
Andrea Coscelli, chief executive of the CMA, said: “About £190bn 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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