Probe into merger of stores moves a step closer

THE COMPETITION watchdog has moved one step closer to opening a full-blown investigation into Sainsbury’s £12bn merger with Leeds-based Asda.

The Competition and Markets Authority (CMA) confirmed on Friday that it is probing the deal and is currently in the “pre-notification” phase, which entails gathering information from Sainsbury’s and Asda before a formal inquiry can begin.

It has also issued a preliminary “invitation to comment”, which calls on interested parties to submit any initial views on the impact that the merger could have on competition.

Rivals such as Tesco and Morrisons will have the opportunity to submit their thoughts on the deal.

The CMA said it will be considering whether the tie-up will result in “a substantial lessening of competition”.

Experts expect the CMA to order the two companies to dispose of scores of stores as part of its review.

The combination of Sainsbury’s and Asda – the second and third biggest players in the UK – will spark one of the biggest shake-ups in the supermarket sector since Morrisons took over Safeway 14 years ago.

The tie-up will create a supermarket titan bigger than Tesco with revenues of £51bn and a network of 2,800 Sainsbury’s, Asda and Argos stores.

Sainsbury’s boss Mike Coupe has said the merger will produce £500m in cost savings and allow the group to further invest in lower prices.

He also said the deal would not lead to store closures or job losses in stores.

Mr Coupe – who would lead the new combined group – said he believed the two supermarkets were “the best possible fit”.

Sainsbury’s and Asda would remain separate brands and no stores will close, Mr Coupe said.

“There’s been a bit of commentary where people have been alluding to the fact that the only way of making this happen is by closing stores – that is not true,” said Mr Coupe.

Labour’s Shadow Business Secretary Rebecca Long-Bailey said she was concerned at the impact on suppliers of the proposed tieup.

The combined group “will have immense purchasing power, giving them an opportunity to bargain very hard with suppliers,” she warned.

Mike Cherry, national chairman of the Federation of Small Businesses, said the firms should reassure people that cost savings would not be achieved “simply by milking their small suppliers”.