Tesco/Booker merger given provisional green light

14-Nov-2017 - Last updated on 14-Nov-2017 at 10:17 GMT

Retail and wholesale merger: the CMA has been provisionally cleared the deal

Tesco’s purchase of Booker has been provisionally cleared by the Competition and Markets Authority (CMA) after it indicated the deal did not raise competition concerns.

The £3.7bn deal was announced in January with both companies claiming it would provide a better availability of food and help independent businesses by improving price, service and availability.

Panel members at the CMA investigated how bringing together the UK’s largest grocery retailer and the UK’s largest grocery wholesaler, which supplies the pub sector, would affect competition.

It examined evidence from Tesco and Booker, as well as evidence from more than 65 wholesalers, suppliers and retail chains and a survey of hundreds of retailers.

The CMA found that Tesco as a retailer and Booker as a wholesaler, supplying to caterers, independent and symbol group retailers, did not compete head-to-head in most of their activities. In particular, Tesco does not supply the catering sector to which Booker makes more than 30% of its sales.

Simon Polito, chair of the inquiry group, said: “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 also considered the impact of the merger in every local area where a Tesco and a Booker-supplied shop were both present (more than 12,000 shops). It did this 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 CMA provisionally concluded that the level of competition in the grocery wholesale and retail markets would be sufficient.

A number of wholesalers had expressed concern that Booker would benefit from improved suppliers’ terms that, in the longer term, might mean it would raise prices.

However, 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.

This is a provisional decision and the CMA is now inviting further comment and evidence before reaching a final decision.