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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