CMA Refers Sainsbury-Asda Merger for In-Depth Investigation

   By Ian Walker

The U.K. Competition and Markets Authority said Wednesday that it will refer J Sainsbury PLC's (SBRY.LN) 7.30 billion-pound ($9.61 billion) acquisition of Asda for a further in-depth phase 2 investigation, saying the deal raises sufficient concern to warrant the extra probe.

"The companies are two of the largest grocery retailers in the U.K. and their stores overlap in hundreds of local areas, where shoppers could face higher prices or a worse quality of service," the CMA said.

It said that an "issues statement" setting out in detail what the inquiry group expects to investigate will be published in the coming weeks.

On April 30, U.S. retailer Walmart Inc. (WMT) said it will sell its U.K. arm, Asda, to rival Sainsbury. If the merger is approved it will create the largest supermarket group in Britain.

The CMA began the first phase of its investigation last month to see if the tie-up could lead to higher prices or poorer service for the country's consumers.

It said at the time that the investigation would consider whether the merger could lead to less choice, and consequently higher prices or poorer services for customers, across the range of products sold by both companies. In addition to groceries, Asda and Sainsbury sell electrical products, toys, clothing and fuel.

The investigation will examine if the new enlarged company could use its increased buying power to squeeze suppliers and if this could have repercussions for consumers, the CMA said in August.

Sainsbury and Asda have both asked the CMA to move more quickly to the in-depth second phase of the inquiry through a "fast-track" process.

Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749