The planned merger between UK supermarkets Sainsbury’s and Asda is being referred for an in-depth “phase two” investigation by the country’s competition watchdog.

The UK’s Competition and Markets Authority (CMA) said the deal raises sufficient concerns to be referred for a more in-depth review.

“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,” it said.

These concerns will be considered further in the investigation, along with other issues raised so far with the CMA – including increased ‘buyer power’ over suppliers.

The phase-two investigation will be led by an inquiry group chosen from the CMA’s independent panel members. This will be chaired by Stuart McIntosh, with the other members being Roland Green, John Thanassoulis, Richard Feasey and Claire Whyley. The group will gather evidence – in particular through multiple customer surveys and engagement with other retailers, suppliers and industry bodies – to inform its analysis.

An issues statement, setting out in detail the issues that the inquiry group expects to investigate, will be published in the coming weeks. Members of the public and other interested groups will be invited to give their views on this.

The CMA’s full referral decision and expected timelines for its Phase 2 investigation will be published shortly.

Sainsbury’s and Asda announced their plans to merge back in April.