UK CMA begins phase 1 probe into Sainsbury’s acquisition of Asda

The UK Competition and Markets Authority (CMA) has started the first phase of a formal probe into the proposed Sainsbury’s acquisition of Asda from Walmart.

Under its investigation, the British competition watchdog will undertake a detailed assessment into how the merger between the two supermarket chains could impact competition for shoppers.

The CMA probe into Sainsbury’s acquisition of Asda will assess if the merger could result in less choice, and thereby spike prices or lead to worse quality services, across the variety of products sold by both the UK supermarket chains.

Apart from being leading UK grocery retailers, in-store and online, Sainsbury’s and Asda also compete with each other in selling goods like fuel, electricals, clothing and toys.

UK CMA commences phase 1 probe into Sainsbury’s acquisition of Asda. Photo courtesy of Crown copyright.

In late April, Sainsbury’s signed a deal to buy Asda from US retail giant Walmart in exchange of £2.975 billion in cash and a stake of 42% in the enlarged business.

The Sainsbury’s Asda merger if approved will have more than 2,800 Sainsbury’s, Asda and Argos stores along with several UK retail websites.

The CMA said that it will also assess if the enlarged UK supermarket chain could use its increased buyer power to pressurize suppliers and if this could have potential knock-on impact for shoppers. Citing an example, CMA said that there could be a case where suppliers being less able to innovate or having to demand higher prices to stores that compete with the Sainsbury’s Asda stores.

Andrea Coscelli – CEO of CMA, commenting on the investigation into the Sainsbury’s acquisition of Asda, 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.”

The CMA said that it has invited opinions on the proposed Sainsbury’s Asda merger by 31 August on how the deal could impact competition.