Morrisons is hopeful of averting a full-scale phase 2 Competition & Markets Authority inquiry into its £190m rescue deal for McColl’s after the watchdog identified a lessening of competition in 35 areas.

The CMA published the findings of its phase 1 investigation today, in which it said “overall, the deal would not harm the vast majority of shoppers or other business”. However it “has found competition concerns in 35 local areas where the two brands compete”.

Morrisons agreed to buy McColl’s, of which it has been the primary supplier since 2018, after the 1,160-store convenience chain collapsed into administration in May. The CMA subsequently began looking into the deal on 13 July.

The CMA not only factored in the possible competition implication between Morrisons and McColl’s stores, but also the 800 or so Motor Fuel Group sites which, like Morrisons, are owned by Clayton Dubilier & Rice.

It has given Morrisons five working days to offer proposals to remedy the competition concerns. It would then take a further five working days to decide whether to accept the proposals, it said.

“As the cost of living soars, it’s particularly important that shops are facing proper competition so that customers get the best prices possible when picking up essentials or doing the weekly shop,” said CMA senior director of mergers Sorcha O’Carroll.

“While the vast majority of shoppers and other businesses won’t lose out, we’re concerned that the deal could lead to higher prices for people in some areas. If Morrisons and McColl’s can address these concerns, then we won’t need to move on to an in-depth investigation.

“In the meantime, we’re working closely with Morrisons to ensure that it can provide the support that McColl’s needs to continue to operate during our investigation.”

The Grocer understands Morrisons was expecting these findings and will be ready to offer the CMA the remedies it deems necessary to allow the deal to progress. These remedies are expected to comprise the disposal of a number of McColl’s stores, though the CMA may not require as many as 35 to be sold.

“We welcome the announcement today by the CMA that the acquisition of McColl’s only raises concerns in a small number of local areas,” said a Morrisons spokesman.

“We will now work closely with the CMA on our proposed remedies in these 35 local areas and look forward to a swift conclusion of the process.”