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Asda and Sainsbury’s warned over competition

The proposed merger between supermarkets Asda and Sainsbury’s could lead to a “substantial lessening of competition”, a government watchdog has warned.

The Competition and Markets Authority identified 463 areas of the country where this would be a realistic prospect, and the potential £12bn merger of the two supermarkets now faces a more in-depth review.

“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.”

A substantial amount of Sainsbury’s and Asda stores carry their Tu and George brands, respectively.

In a joint statement, Sainsbury’s and Asda said consumers would be the merger’s “big winners”.

“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.

“We look forward to working with the CMA on the Phase 2 inquiry, where we expect it to conduct a full review of the market and take these changed market dynamics into consideration.”

Experts said that the decision should not be taken as an indication that the merger is less likely to be approved.

“Whether the merger goes ahead is dependent on the number of disposals the CMA demands being palatable to the merging parties,” said Patrick O’Brien, the UK retail research director at GlobalData, a leading data and analytics company.

The merger would create a network of 2,800 Sainsbury’s, Asda and Argos stores with revenues of £51bn.

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