SBRY Sainsbury (j) Plc

By Maryam Cockar

The U.K. competition watchdog is to examine the potential effect on suppliers of the proposed merger of J Sainsbury PLC (SBRY.LN) and Asda Group Ltd., as well as consider the affect of growing competition from discount grocers.

The Competition and Markets Authority said Tuesday that it will look at whether the enlarged group could use its increased buying power to squeeze suppliers and if this could have a possible knockon effect for consumers.

It said suppliers might not be able to innovate as much or could have to charge higher prices to rivals that would compete with the merged company.

The CMA said it will assess competition from discount retailers such as Aldi and Lidl, which have expanded significantly in the U.K. in recent years, and examine whether the merger would reduce competition.

The CMA will also consider competition from B&M European Value Retail SA (BME.LN) and online-only retailers such as Ocado Group PLC (OCDO.LN) and Amazon (AMZN).

In April, U.S. retail giant Walmart (WMT) said it would sell its U.K. arm, Asda, to Sainsbury in a deal that valued the grocer at about 7.3 billion pounds ($9.59 billion). If the tie-up is approved it would create the largest supermarket in U.K.

In September, the CMA referred the merger for an in-depth investigation and recently said that it has identified 463 areas in the U.K. where the two grocery chains overlap.

The CMA said it expects to issue its provisional findings early next year, ahead of the deadline for its final decision on the proposed merger on March 5.

Write to Maryam Cockar at maryam.cockar@dowjones.com

(END) Dow Jones Newswires

October 16, 2018 07:28 ET (11:28 GMT)

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