Watchdog kicks off investigation into Sainsbury-Asda merger

Confirming that a formal phase-1 investigation into the proposed £7.3bn merger was expected to begin "in the coming months", the Competition & Markets Authority said it was currently in the ‘pre-notification’ phase to ensure both parties have provided all the information required.

The invitation to comment asks all interested parties to submit "any initial views on the impact that the proposed merger could have on competition" at a local and national level. The deadline for submitting these comments is 4 June.

Buying Asda from Walmart would give Sainsbury’s about 31% of the UK grocery market. The combined market share of Sainsbury’s and Tesco would be almost 60%.

The CMA, where former Commons Treasury committee chair Andrew Tyrie is about to take over as chairman, said the investigation will be run by Colin Raftery, director of mergers, who previously was a senior associate at law firm Freshfields Bruckhaus Deringer, where he acted as an external legal adviser to Tesco for a short while in 2015.

Noting that his work with Tesco was "on matters unrelated to the proposed merger", the CMA said it "does not consider that the matters mentioned above will prevent Colin performing his role, or the CMA discharging its functions, in an independent and impartial manner with regard to the proposed merger".

The CMA's phase-1 review typically lasts 40 days before the body decides whether to move to a deeper phase-2 inquiry that lasts up to 24 weeks. Sainsbury’s has argued buying Asda will be good for consumers because prices will fall but MPs are concerned about the impact on suppliers.

Business Secretary Greg Clark has reportedly written to the head of the CMA to express his view that when assessing the merger it ought to take account of the "possible impact on the supply chain".

Clark's letter to the CMA called for the probe to take account of both the “horizontal and vertical competition issues”, including the possible impact on the supply chain as well as competitors, the Financial Times reported.

Earlier this month, the chairs of two parliamentary committees expressed concerns about the merger's impact on the grocery supply chain of a deal that would leave Sainsbury’s and Tesco dominating the grocery retail market. They also voiced misgivings about the effect on suppliers and consumer choice..

Asda, which is owned by WalMart, on Thursday reported sales growth of 3.4% for the first quarter, with seasonally adjusted like-for-like sales 1.0%. Gross profit was down but net operating income was up.