SAINSBURY'S and Asda have been warned that nearly 500 of their supermarkets overlap following initial investigations into a £12billion tie-up.

The Competition and Markets Authority (CMA) said findings of its ‘phase one’ inquiry into the deal found potential competition issues for stores in 463 local areas.

Local branches include the Sainsbury’s and Asda stores at opposite ends of Bournemouth’s Castlepoint shopping park.

The CMA last week launched the second stage of its investigation into the merger, which will create a supermarket titan bigger than Tesco, with revenues of £51billion and a network of 2,800 Sainsbury's, Asda and Argos stores.

In findings of its initial inquiry and decision to refer the deal to a phase two probe, The CMA said: "At a local level, the parties' stores overlap in several hundred local areas across the UK.

"The CMA believes that the merger may give rise to a realistic prospect of an SLC (substantial lessening of competition) in many of these local areas if Sainsbury's and Asda are insufficiently constrained by other local competitors."

A spokesman for Sainsbury's and Asda said: "The grocery market has changed significantly in the last decade and is more competitive than ever, with the rise of discount formats, online grocery and food delivery businesses.

"We look forward to working with the CMA on the Phase 2 inquiry, where we expect it to conduct a full review of the market and take these changed market dynamics into consideration."