Sainsbury’s-Asda merger buoyed by inclusion of Aldi and Lidl in competition probe

PA

The competition watchdog will take into account the rapid growth of Aldi and Lidl when deciding whether to approve the £12 billion mega-merger between Sainsbury’s and Asda.

It was feared last month that Aldi and Lidl would not be considered in the Competition and Market Authority’s (CMA) investigation into the deal, after an initial analysis excluded the discounter chains as well as convenience stores.

But its latest update, the CMA said it has broadened its scope to include the German discounters as well as non-grocery competitors such as B&M, Amazon, and John Lewis & Partners.

The CMA will now assess which other businesses can be considered competitors to Sainsbury’s and Asda.

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Provisional findings will be presented early next year, while a final decision must be made by March 5 2019.

Stuart McIntosh, chairman of the CMA’s inquiry group, said: “Millions of people shop at Asda and Sainsbury’s every week, so it is essential we carry out a thorough investigation into their proposed merger.

“Our job is to find out whether the merger will result in people paying more or being faced with less choice or a poorer quality shopping experience.

In their own submission to the CMA, Sainsbury’s and Asda said that Aldi and Lidl “have had the most profound impact” on the grocery market over the past decade.

The duo also pointed to the launch of Jack’s, Tesco’s new convenience store outlet.

Tesco unveils new Jack’s concept
Tesco unveils new Jack’s concept

“Their rapid expansion both in store numbers and product range and quality, have changed customer perceptions of ‘value’ and ‘convenience’ and they are now mainstream grocery competitors, with over 20% volume share of fresh food.

“All UK grocers have had to adapt their strategies in response; Tesco launching Jack’s is the latest example of this.”

The firms also described their marriage as “pro-competitive”, arguing that it will help enable them respond better to changed consumer behaviour.

The CMA’s investigation will also consider whether the tie-up could lead to less choice, higher prices or poorer quality services.

It will look at whether the merged company could use its increased buying power to squeeze suppliers and whether this could have potential knock-on effects for shoppers.

Sainsbury’s and Asda have gone on record saying that suppliers will bear the brunt of a pledge to bring down the price of everyday products following their union.

It is also expected that scores of stores will have to be offloaded as part of the competition review.

Sainsbury’s and Asda have claimed that the shock deal, announced earlier this year, will result in cheaper everyday items, although it is not yet known where the price cuts will fall.

A spokesman for Asda and Sainsbury’s said: “Customers will be the big winners from the combination. By bringing our 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.”