The competition watchdog will consider the impact Aldi and Lidl have had on the UK grocery market during its probe of the proposed Sainsbury’s-Asda merger.

The CMA has confirmed for the first time today that it will “examine the strength of retailers such as Aldi and Lidl, and the extent to which customers are likely to treat them as close alternatives to the Parties [Sainsbury’s and Asda] for different types of grocery shopping trips or ‘missions’”.

It formed part of the watchdog’s Issues Statement, published today, that sets out the key areas it plans to scrutinise as part of its Phase Two investigation of the deal.

The CMA said it will “assess whether the merger could lead to a worse outcome for shoppers through higher prices, a poorer shopping experience, or reductions in the range or quality of products offered”.

It will look at groceries, bought both in-store and online, as well as other categories such as toys, small electricals and children’s clothing.

The CMA added that “the level and impact of competition presented by newer or growing retailers – including Aldi and Lidl – will be considered alongside these issues”.

It also plans to assess whether the merger could “make it easier for supermarkets to align their commercial decision-making”, which could in turn lead to “less vigorous competition”.

Consumers and suppliers

Sainsbury’s and Asda have insisted that the combination of the two businesses would result in price reductions of up to 10% on grocery staples such as eggs, bread and milk.

Although the CMA’s primary remit is to focus on the impact the proposed combination would have on consumers, the watchdog said it would also “look at whether the merged company could use its increased buyer power to squeeze suppliers”.

It suggested that if suppliers were “less able to innovate” or were put in a position of “having to charge higher prices”, this would have a “knock-on effect” on shoppers.

The CMA said it would gather a “wide range of evidence” to explore those issues, including surveys from Sainsbury’s and Asda shoppers and the views of their grocery competitors.

Any responses to the Issues Statement must be made by October 30.

Stuart McIntosh, chair of the independent inquiry group carrying out the investigation, said: “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.

“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.

“Today, we are setting out a number of areas that we expect to look at as part of our investigation. We welcome views on the effects of the merger and will carefully consider any evidence that we receive.”

A spokesman for Sainsbury’s and Asda said: “We recognise that this is an important merger and welcome the detailed and thorough review by the CMA. We look forward to working constructively with the CMA and inquiry panel during this second phase of the process and to making our case that the proposed merger is pro-competitive.

“Customers will be the big winners from the combination. By bringing our two businesses together, we will be able to invest further in more convenient ways of shopping while lowering prices and reducing the cost of living for millions of UK households.”