Sir, It won’t come as a surprise to anyone that the CMA is officially launching an investigation into the proposed merger between Sainsbury’s and Asda.
Both retailers are looking to save time and energy by requesting that the investigation moves straight to Phase 2, a sensible recognition of the fact that this is inevitably what the CMA will do anyway.
The CMA will now look into the likely impact of the merger on the industry. Due to the potential for the newly merged entity to have significantly more buying power, suppliers to Sainsbury’s and Asda will certainly raise concerns that there will be too much market power concentrated in common control. For the merger to proceed, it will be important for the CMA to be persuaded (for the sake of suppliers) that the deal will not lead to undue buying power. Sainsbury’s and Asda will no doubt point to the many changes to the marketplace in recent years plus the advent and progress of the discounters in order to create more choice, for suppliers and customers alike.
Another key concern for the CMA will be that customers could be left with insufficient choice in some locations where the merging parties are the primary if not only options for day-to-day groceries. Sainsbury’s and Asda will surely already have identified the geographical locations in which the CMA may be most likely to consider there to be insufficient choice in the event of a merger and may consider volunteering the sale of some of these stores.
Jonathan Branton, head of EU and competition, DWF