Following today’s (Thursday 27 September) publication of the CMA’s phase 1 decision on the merger of ASDA and Sainsbury’s, Patrick O’Brien, UK Retail Research Director at GlobalData, a leading data and analytics company, offers his view:

“While the CMA has signalled that there is the threat of substantial lessening of competition in 463 areas across the UK as part of its phase 1 investigation, this should not be taken as an indication that the merger is less likely to be approved.

“The methodology used in phase 1 is a cruder calculation based on identifying whether or not the number of fascias in a catchment area would be reduced to less than four as a result of the combination of ASDA and Sainsbury’s. In phase 2, the CMA will be applying the much more complex ‘weighted share of shops’ technique, which is expected to weight the impact of competitors by how close they are geographically, and how closely they compete for the same shopping missions.

“Whether the merger goes ahead is dependent on the number of disposals the CMA demands being palatable to the merging parties. How far the number of problem areas falls to in phase 2 hangs on how the CMA treats Sainsbury’s request that stores smaller than 1,400 sqm should be considered to have a competitive impact on larger supermarkets. Most Aldi and Lidl stores fall under 1,400 sqm, but most of ASDA’s stores are larger. For the purposes of phase 1, the CMA kept them apart, and yet it makes little sense to think that the former has no impact on the latter, even if they don’t always compete for the same shopping missions.”