Britain's competition watchdog has launched its investigation into whether the proposed £12 billion merger between Sainsbury's and Asda could harm suppliers and consumers.
The Competition and Markets Authority (CMA) said it would look at whether the combined company could use its enhanced buying power to squeeze suppliers, particularly smaller ones, with negative implications for consumer choice.
The investigation will also examine how the deal could push up prices and affect product quality in the groceries market.
Earlier this year business minister Greg Clark wrote to the CMA asking it to consider the “possible impact on the supply chain”. And in May, chair of the environment food and rural affairs committee Neil Parish warned that “the cost savings being promised through this merger must not come through squeezing those further down the supply chain'.
The merger would see Sainsbury's and Asda leapfrog Tesco to become the largest retailer in the UK, with a combined market share of 31.4 per cent, according to Kantar Worldpanel.
The Guardian reported that some industry insiders have voiced concerns about the emergence of a “duopoly”, with the top two UK supermarkets set to control nearly 60 per cent of the grocery retail market.
Sainsbury's and Asda are expected to be forced to sell off a number of stores following the competition review. According to an analysis byThe Timesand industry bodies employing modelling techniques typically used by the CMA, there are at least 300 catchment areas where the merger could potentially fall foul of local competition regulations.
The CMA told The Guardian that it was not legally allowed to investigate whether the merger would lead to job losses as the combined business trims areas of overlap.
The retailers have asked the CMA to fast-track Phase 1 of the investigation so it can move rapidly on to the in-depth second phase. The watchdog said it expected to accept the request unless it receives valid objections by 31 August.
