Sainsbury’s heads into battle with watchdog over £15 billion Asda merger

Sainsbury’s on Wednesday went to war with the competition watchdog over its investigation into the supermarket chain’s £15 billion merger with Asda.

The grocer launched a legal challenge against the Competition and Markets Authority. It said the watchdog is not allowing it enough time to respond to some of the arguments raised against the deal by competitors, suppliers and trade bodies.

The combined business between Britain’s second and third-biggest supermarkets will narrowly become a larger business than rival Tesco. The tie-up has been referred for an in-depth investigation, expected to be completed by the end of March.

However, Sainsbury’s, led by Mike Coupe, said on Wednesday it felt the timetable “does not give… sufficient time to provide and consider all the evidence given the unprecedented scale and complexity of the case”.

The chain has asked for a further 11 days over the Christmas period to have its lawyers pore over the documents, but the CMA declined. The watchdog, however, explained it had already extended some deadlines, to help the two businesses. Further extensions, it added, could lead to the CMA breaking the law.

“Wednesday’s update and the CMA’s previous indication that the deal could result in higher prices and a lower quality of service for consumers do not offer the most encouraging signs on how things might progress from here,” said AJ Bell’s Russ Mould.

“Investors may begin to question Sainsbury’s management more strongly on the merits of pressing ahead with the tie-up, given the demands it places on their time and resources. If the CMA rules against the deal then it is fair to say their credibility will be in tatters.”

A spokeswoman for the CMA said: “If we gave the companies the extra time they are now asking for, it would put our ability to complete the investigation by the required deadline at very serious risk. We have done everything we can to aid their consideration of this work, whilst still ensuring we are able to meet our legally binding deadline.”

A spokeswoman for Sainsbury’s and Asda added: “This is not a decision we have taken lightly. It is about ensuring a thorough process and reasonable timetable. We remain confident in the case for merging the businesses and the significant customer benefits.”

Insiders said Sainsbury’s decision was “a highly unusual move”, but not unprecedented. The retailer’s shares fell 4.5%, or 13.4p, to 283p, as the City lost confidence the deal would happen. Bernstein analyst Bruno Monteyne said the move was a “short-term negative”.