The Competition and Markets Authority (CMA) has launched an “in-depth review” into the proposed £12 billion merger between supermarkets Sainsbury’s and Asda.
On Wednesday morning, the CMA said its initial probe has confirmed the deal “raises sufficient concerns” that need further investigation.
It added: “The companies are two of the largest grocery retailers in the UK and their stores overlap in hundreds of local areas, where shoppers could face higher prices or a worse quality of service.”
The watchdog said its in-depth probe will also look at other issues raised so far, including those relating to fuel, general merchandise such as clothing, and increased “buyer power” over suppliers.
The announcement comes just two weeks after an MP warned that the merger could mean parents see school uniform prices “rocket”.
Lucy Powell, Labour MP for Manchester Central, said the takeover of Asda by Sainsbury’s could create a monopoly and see families on the breadline pushed into poverty by the cost of dressing their children for school.
A basic uniform at Asda costs £10, compared to £15 at Sainsbury’s.
Powell urged the two supermarket giants to offer families a binding price guarantee before the merger is complete.
The CMA will issue a statement detailing other issues for review in the “coming weeks”.
It was previously reported that the merger would see the two companies seize a 30% slice of the market.
Amid fears of price rises, both bosses previously claimed the deal could see discounts passed on to consumers, thanks to reduced costs.
In April, Asda boss Roger Burnley said: “The combination of Asda and Sainsbury’s into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice.”