With just weeks to go before it is due to release its provisional findings on the proposed merger, seven of the UK’s leading wholesalers have urged the UK’s competition authority to throw out the Tesco-Booker deal.
In a joint letter to the Competition & Markets Authority (CMA), the managing directors of Bestway, Bidfood, Confex, Landmark, Spar, Sugro and Today’s co-signed a letter that warns the power of the merged group will give independent retailers a stark choice - join Booker/Tesco or go out of business.
In the letter, which has been submitted to the CMA as part of its ongoing phase two investigation, the seven claim Tesco’s unrivalled power in grocery procurement would harm suppliers and result in higher prices and less choice for independent retailers and consumers.
The letter says: “We are keen to refute these suggestions and to express how concerned we are about the very future of grocery wholesaling and retailing in the UK, as well as supply to the foodservices industry.
“If the merger proceeds, Tesco will have incontestable power over the procurement of all grocery categories in the UK. Suppliers will find it even harder to resist Tesco’s demands.
Some suppliers, particularly of branded products, will fail without access to Tesco stores. Others, aware of this risk, will give in to its demands.”
The letter claims the deal “so threatens competition in the sale of groceries in the UK” that “the very survival of the independent retailer” is at stake.
“Booker will be able to buy its products at Tesco’s prices. With these prices, it will be able to drive its competitors, be they delivered wholesalers, cash & carry or symbol operators, out of business. At the retail level, the combination of Booker’s wholesale prices and Tesco’s deep pockets will present independent retailers with a stark choice: Join a Booker/Tesco symbol or go out of business”.
The wholesale bosses make parallels with the situation and the backdrop that led to the need for the creation of the Groceries Supply Code of Practice.
“The need to introduce GSCOP was brought about by your predecessor’s findings of existing abuse in procurement by the multiples,” it says.
“Companies such as ours, that compete for these supplies, are always disadvantaged. We already pay more, not only because we cannot match Tesco’s volumes but equally because of what you have termed the ‘waterbed’ effect. This is not a theory; it is very real. In the same way, when stocks are in short supply, it is the supermarkets that are guaranteed supply and wholesalers supplying the convenience sector go short. This imbalance will get worse if the merger proceeds; Booker will be a beneficiary, rather than a victim, of this behaviour.
“Will the consumer benefit? Perhaps in the shorter-term prices will drop while Booker and Tesco attract new wholesale, symbol, retail and foodservice business. Over time, however, as competition is weakened and eliminated, normal economics will prevail and Tesco/Booker will raise its prices to its convenience and foodservice buyers.
“Consumers will experience a reduction in choice of store, product range and opening hours.”
The letter is signed by Martin Race, managing director of Bestway, Andrew Selley, MD of Bidfood, Nicky White, MD of Confex, John Mills, MD of Landmark Wholesale, Debbie Robinson, MD of Spar UK, Philip Jenkins, MD of Sugro UK and John Schofield, MD of Today’s Wholesale Services.
In August, Tesco boss Dave Lewis and Booker chief Charles Wilson wrote to the CMA saying the acquisition would enhance competition in the UK and promote consumer interests.
The CMA’s final decision is due by the end of the year.