Sainsbury’s-Asda merger will impact competition in 463 local areas, competition watchdog warns
The UK competition authority today warned the mega merger between Asda and Sainsbury's could Seriously lessen competition in 463 local areas across the country.
To solve the issue, the new business may have to sell off hundreds of the overlapping stores.
Last week, the Competition and Markets Authority (CMA) said its concerns around the merger were serious enough to refer it to a more detailed second phase investigation.
Releasing the results of the Phase 1 investigation today, the CMA said there was a "realistic prospect of a substantial lessening of competition (SLC)" in many local areas.
Read more: Watchdog applies further scrutiny to Sainsbury's-Asda merger
"At a local level, the Parties’ stores overlap in several hundred local areas across the UK," the CMA said. "The CMA believes that the merger may give rise to a realistic prospect of an SLC in many of these local areas if Sainsbury’s and Asda are insufficiently constrained by other local competitors."
It also said: "the parties are an important competitive constraint on each other". Sainsbury's has 606 supermarkets, while Asda has 584.
Earlier this year, Sainsbury's announced plans to acquire Asda in a £12bn deal which could shrink the number of supermarkets in the UK. As a merged entity, the British supermarkets would command almost £1 in every £3 spent on groceries.
In the second phase of the CMA's investigation, independent panel members will gather more evidence through customer surveys, discussions with rival retailers, suppliers and industry bodies.
A spokesperson for Sainbury's and Asda welcomed the start of the second phase process.
"The grocery market has changed significantly in the last decade and is more competitive than ever, with the rise of discount formats, online grocery and food delivery businesses," they said.
"By bringing the two businesses together, we will be able to invest further in more convenient ways of shopping while lowering prices and reducing the cost of living for millions of UK households."
A statutory deadline of 5 March has been set for the CMA to reach a decision.
Read more: The CMA has officially launched a probe into the Sainsbury's Asda merger