CMA launches investigation into Sainsbury's proposed merger with Asda

The competition watchdog said on Thursday that it will consider whether the deal could lead to less choice, and therefore higher prices or worse quality services, across the range of products sold by both companies. It pointed out that as well as being major retailers of groceries in-store and online, both businesses also sell goods such as fuel, electricals, toys and clothing.

The CMA will also look at whether the merged company could use its increased buyer power to squeeze suppliers and whether this could have potential knock-on effects for shoppers.

Chief executive Andrea Coscelli said: "About £190bn 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."

Sainsbury's and Asda have asked the watchdog to 'fast track' the phase 1 investigation so it can move more quickly to the in-depth phase 2 probe. The CMA said it expects to accept this request unless it receives any valid objections.

Sainsbury's and Asda announced back in April that they had agreed a deal to merge their supermarkets, which would see Asda owner Walmart own 42% of the combined business. The deal values Asda at around £7.3bn.

At 1410 BST, Sainsbury's shares were down 0.6% to 339.60p.