The supermarkets’ catchment areas overlap in 463 places, competition watchdog finds.
The Competition and Markets Authority (CMA) said it had found a “realistic prospect of a significant lessening of competition” in 463 places in the UK where local supermarkets’ catchment areas overlapped.
The CMA announced last week that it had referred Sainsbury’s plan to buy Asda to a more in-depth “phase two” investigation, but a 21-page ruling by the CMA published on Thursday gives the full detail behind that decision.
The watchdog said its initial investigation to date indicated overlap within the supply or acquisition of groceries, fuel and homewares. It said the two grocers would account for just over 30% of the groceries sold by the top nine UK supermarket chains and, alongside market leader Tesco, would control a total of 60%.
While the number of stores that may have to close for Sainsbury’s and Asda to complete the deal is high – equivalent to nearly 40% of the combined group’s 1,210 supermarkets, analysts expect the final number of required closures could be significantly lower.
The initial analysis of the effect of the £10b merger of the UK’s second and third largest supermarkets only took into account potential overlap between the two chains’ medium-sized and largest stores and those of their four traditional rivals.
It did not consider potential competition from convenience stores, Aldi or Lidl. The CMA said that while competition from the two discounters had been considered in recent cases, such as Tesco’s merger with convenience store supplier Booker, those investigations largely been concerned with convenience stores.
It said that their competitive position against medium and large-sized stores which make up the bulk of Sainsbury’s and Asda’s businesses had not been previously considered in detail and so this would be a matter for the phase two investigation.