The UK’s competition regulators are sensationally set to approve Tesco, without imposing conditions such as selling off hundreds of its stores.
The Competition and Markets Authority (CMA) announced today it had provisionally concluded the deal did not raise competition concerns.
The regulator said a group of independent panel members had investigated how bringing together the UK’s largest grocery retailer and the UK’s largest grocery wholesaler would affect competition.
Having examined evidence from Tesco and Booker, as well as more than 65 wholesalers, suppliers and retail chains and a survey of hundreds of retailers, the panel found that the level of competition on the grocery wholesale and retail markets was “sufficient” to deal with the new mega merger.
It also claimed the deal could lead to increased competition in wholesale and better prices for shoppers.
The CMA found that Tesco and Booker, which supplies caterers, independent and symbol group retailers including Premier, Londis and Budgens, did not compete head-to-head in most of their activities.
In particular, it said, Tesco did not supply the catering sector to which Booker makes over 30% of its sales.
The CMA said it had investigated the impact of the merger in every local area where a Tesco and a Booker-supplied shop were both present, involving more than 12,000 shops, to examine whether in any of these areas it might be profitable for the merged company to raise prices or reduce service levels either in retail or wholesale.
The panel had provisionally concluded that the level of competition in the grocery wholesale and retail markets would be sufficient to defeat such a strategy.
The CMA opened its phase 1 investigation into the merger in May and the companies later requested a ‘fast track’ referral to the next stage of the investigation.
However, there has been huge opposition to the deal from the wholesale sector
In October seven of the UK’s leading wholesalers wrote a joint letter to the Competition and Markets Authority (CMA) urging it to block the deal .
The managing directors of Bestway, Bidfood, Confex, Landmark, Spar, Sugro and Today’s warned of a devastating impact on competition and warned Booker would be able to raise prices to the shops that it supplies.
The CMA found that it was likely Booker would be able to negotiate better terms from a number of its suppliers for some of its groceries, and that it was likely to pass on some of the benefits of these savings to the shops that it supplies.
But instead of reducing competition, it said this might increase competition in the wholesale market, as well as reducing prices for shoppers.
However, the CMA also concluded that the wholesale market would remain competitive in the longer term, claiming Booker’s share of the UK grocery wholesaling market – at less than 20% – was not sufficient to justify the longer-term concerns.
“Millions of people use their local supermarket or convenience store to buy their groceries or essentials,” said Simon Polito, chairman of the CMA inquiry group. “Strong competition in the market ensures that shoppers can choose the best deal for them.
“Our investigation has found that existing competition is sufficiently strong in both the wholesale and retail grocery sectors to ensure that the merger between Tesco and Booker will not lead to higher prices or a reduced service for supermarket and convenience shoppers.”
The CMA’s will now invite further comment and evidence before coming to a final view by the end of the year.
A spokesman for Tesco said: “Tesco welcomes the announcement from the Competition and Markets Authority (CMA) that it has given provisional unconditional clearance of our merger with Booker Group.
“We look forward to creating the UK’s leading food business, bringing together our combined expertise in retail and wholesale. This merger has always been about growth, and will bring benefits for independent retailers, caterers, small businesses, suppliers, consumers, and colleagues.
“We will continue to work with the CMA as it prepares the Final Report due by the end of December. We anticipate completion of the merger in early 2018.”
A spokesman for Booker added: “Booker welcomes today’s announcement from the Competition & Markets Authority (CMA) that it has provisionally cleared the company’s proposed merger with Tesco.
“We are pleased that the CMA has provisionally concluded that this transaction does not lessen competition, and will continue to work with the CMA ahead of its publication of a final decision, expected in December.
“We are grateful for the support of customers, suppliers and colleagues during this process.”
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