Sainsbury’s and Asda merger faces closer scrutiny over suppliers

By Michelle Perrett

- Last updated on GMT

The deal will come under scrutiny from the CMA
The deal will come under scrutiny from the CMA
The Competition and Markets Authority (CMA) will consider groceries bought in-store and online as well as non-food items in the in-depth investigation it intends to conduct into the proposed merger between Sainsbury’s and Asda.

The CMA said it would scrutinise a range of issues, including whether the merged company could use its increased buyer power to squeeze suppliers.

It said it would also consider whether this could have a potential knock-on effect for shoppers, due to suppliers being less able to innovate or having to charge higher prices to other stores that compete with the combined Sainsbury’s/Asda. 

The organisation said it would also scrutinise – at a local and national level – groceries, bought in-store and online; fuel; and other items such as toys, small electricals and children’s clothing.

 

‘Thorough investigation’

Stuart McIntosh, chair of the independent inquiry group carrying out the in-depth investigation, said: “Millions of people shop at Asda and Sainsbury’s every week, so it is essential we carry out a thorough investigation into their proposed merger. Our job is to find out whether the merger will result in people paying more or being faced with less choice or a poorer-quality shopping experience.”

The CMA said it was also seeking views from individuals or organisations that were able to provide information useful to the investigation.

The CMA said it expected to issue its provisional findings early next year, ahead of the statutory deadline for its final decision on 5 March 2019.

Clive Black, analyst at Shore Capital, said: “The analysis is a big one for the CMA and we sense it will be a challenge.

 

‘Balanced’

“History has taught us not to seek to second-guess this body and so we will put away our Mystic Meg ball at this juncture. What we do take out of the statements released is that Sainsbury’s and Asda refer to the limited assortment discounters (LADs), bargain store operators and Amazon an awful lot; we sense the CMA will be more balanced. 

He added that consumer surveys were likely to be important, as would the world of suppliers and their relationship with shoppers through any merger.

Related topics: Supply Chain

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