UK regulators will consider the impact on suppliers when deciding whether or not to approve the proposed £12bn merger of J Sainsbury PLC (LON:SBRY) and Walmart Inc's (NYSE:WMT) Asda.
The tie-up, which was first announced at the end of April, would command an estimated 30% share of the UK grocery market, surpassing Tesco PLC (LON:TSCO) to create the nation’s largest supermarket chain.
READ: Merger could substantially lessen competition, say watchdog
The impact of the merger on customers was always going to be a key factor of the Competition and Markets Authority’s investigation, but MPs wanted the watchdog to bring supplier issues within the remit of the inquiry.
Setting out the areas it will scrutinise as part of its in-depth phase 2 probe, the CMA confirmed it will look at whether the enlarged company could use its increased buying power to “squeeze suppliers” and if this could have a knock-on effect for shoppers.
“This would be due to suppliers being less able to innovate or having to charge higher prices to other stores that compete with the combined Sainsbury’s / Asda,” read the CMA’s statement.
Shoppers will remain at the heart of the inquiry, with the regulator wanting to find out if the merger could lead to higher prices, a poorer shopping experience or reductions in the range and quality offered.
Groceries, fuel, toys, small electricals and children’s school uniforms will be the areas under the most scrutiny.
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The growing popularity of Aldi and Lidl and their effect on competition within the sector will be factored into its report, the CMA added.
“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,” said Stuart McIntosh, chair of the independent inquiry group carrying out the in-depth investigation.
“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.”
The provisional findings from this stage of the investigation are expected to be issued early next year, before the watchdog gives its final decision to ministers on March 5 2019.