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Tuesday 23 January 2018

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CMA gives the all clear to Tesco-Booker merger

Written by Chris Lemmon
21/12/2017

Following an in-depth review, the Competition and Markets Authority (CMA) has concluded that Tesco’s purchase of Booker raises no competition concerns.

A group of independent panel members at the CMA found that Tesco, as a retailer, and Booker, as a wholesaler, do not compete head-to-head in most of their activities. The group did consider the impact that the deal would have on stores such as Premier, Londis and Budgens, which Booker is the main supplier to.

The CMA determined that Booker does not own the shops it supplies and these retailers are free to set their prices and decide which products to stock. So, although these shops compete with Tesco, Booker cannot directly determine how they compete.

Given Tesco’s influence generally in the retail sector, the CMA also examined whether the merged company could raise prices or reduce service quality at either the wholesale or retail levels. It found that existing strong competition in wholesale and retail made this unlikely.

The CMA also considered concerns that, after the merger, Booker would be able to use Tesco’s buying power to purchase groceries from suppliers at lower prices and that other wholesalers might not be able to compete. This could lead to Booker eventually raising its prices if the choice did not then exist to keep prices competitive. But the CMA concluded that the wholesale market would remain competitive in the longer term, noting that Booker’s share of the UK grocery wholesaling market was not sufficient to justify these longer-term concerns.

Simon Polito, chair of the inquiry group, said: “We have carefully listened to feedback from retailers and wholesalers who operate in what are highly competitive UK retail and wholesale sectors. Retailers have told us that they shop around for the best prices and service from their wholesaler, and we are confident that this will continue after Tesco buys Booker.

“This has been an important investigation for us. Millions of people use their local supermarket or convenience store to buy their groceries or essentials, so it is vital that they have enough choice to secure the best deal for them. Having examined the evidence in depth, we are satisfied this will remain the case following the merger.”



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