Sainsbury's, Asda playing with fire by taking CMA to judicial review over merger investigation

On a day in which Britain was (again) going completely mad, Sainsbury's and Asda decided to take the Competition & Markets Authority to a judicial review of the timescale of its investigation into their merger.

Yes you read that right. You could say it added another layer of icing to the crazy cake.

The two chains say they need extra time - 11 days - to get their submissions in and to have them properly considered, hence their ‘reluctant’ decision to take this step, which is all but unprecedented, certainly in the history of the watchdog which was formed in 2014. It generally takes heat for moving too slowly.

Is this amateur hour or do they have a point?

The pair argue that this is a very big deal with a lot of moving parts. They have interests in multiple business lines: Grocery, fuel, clothing, and more besides. They operate an enormous number of stores, and in some areas will have local monopolies if and when the deal completes. They would naturally like to keep the number of forced disposals to a minimum.

As a result, I’m told they have teams of economists and lawyers working round the clock to get everything filed. Pity the CMA’s people who will have to go through it all. They also have to afford interested parties - such as competitors - to have their say and to consider their submissions too. A regulator’s lot is not a happy one.

That said, this deal was first announced last April and the CMA’s investigation, which is scheduled to be completed in March, was fast tracked at the request of the merger partners, who opted to skip Phase One and move straight to the always inevitable Phase Two investigation.

Now Phase One and Phase Two are very different processes. But let’s look at this in practical terms. If they’d wanted and needed to string things out, and create extra time, it’s not as if they didn’t have the opportunity to do that.

Now, much later in the day, we have this.

The CMA would tell you that it will consider the case on its merits regardless.

But there’s a reason companies generally try to cultivate cordial relationships with their regulators. Goodwill can go a long way and I’m told the CMA has done its best to offer some by being flexible, and letting some deadlines slip. At some point you simply have to call time.

Going forward goodwill may be in short supply. It’s worth remembering that this is a hugely controversial transaction that has already generated considerable heat given the size of the business that will be created and the power it will have in the market. The combined Asbury's market share will be similar to that of Tesco. Everyone else will be minnows by comparison and if the CMA opts to take a tough line it won't be short of supporters. To the contrary.

And what if the pair lose? They’ll not only have burned bridges. They will be left with egg all over their faces. Still, there’s no shortage of people in that position right now, so at least they won’t be alone. Maybe that’s what encouraged them.