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CMA says it will con­sider the sup­ply chain im­pact of su­per­mar­kets' mega-merger

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In a de­vel­op­ment giv­ing J Sains­bury’s (SBRY) share­hold­ers food for thought, the UK Com­pe­ti­tion & Markets Au­thor­ity (CMA) has an­nounced (23 Aug) the for­mal launch of its in­ves­ti­ga­tion into the gro­cer’s pro­posed mega-merger with Asda with a broader than an­tic­i­pated re­mit.

The reg­u­la­tor will con­sider the sup­ply chain and the im­pact upon shop­pers of the Sains­bury’s/ Asda merger, look­ing at whether the en­larged su­per­mar­ket gi­ant could use its beefed-up buy­ing power to squeeze sup­pli­ers and whether this will have a knock-on ef­fect on the con­sumer; sup­pli­ers might be less able to in­no­vate or might have to charge higher prices to com­pet­ing stores.

Shore Cap­i­tal an­a­lyst Clive Black says: ‘That it has de­cided to do so may be a dis­ap­point­ment, if not a sur­prise, to the deal team. We sense that do­ing so does heighten the risk of an un­de­sir­able out­come for them but by how much is hard to say.’

Black points out the CMA ‘is also look­ing be­yond gro­cery – cloth­ing, elec­tri­cal items, fuel and toys – which again brings scope, com­plex­ity and time to mind’.

Even if the deal gets through the clear­ance stage, man­age­ment would face the her­culean task of in­te­grat­ing two very dif­fer­ent chains. The sec­tor, save for Sains­bury’s, is also trad­ing well.

Ac­cord­ing to the lat­est gro­cery mar­ket share fig­ures (21 Aug) from Kan­tar World­panel, cov­er­ing the 12 weeks to 12 Au­gust, Mor­risons (MRW) has re­gained its po­si­tion as the fastest grow­ing ‘Big Four’ su­per­mar­ket, Aldi and Lidl con­tinue to grow while Sains­bury’s mar­ket share de­clined by 0.4% to 15.5%. (JC)

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