Seven of the UK’s leading wholesalers have written to the Competition and Markets Authority (CMA) to block the Booker-Tesco merger on the grounds that it would give Tesco “incontestable” power and drive others out of business.
The managing directors of Bestway, Bidfood, Confex, Landmark, Spar, Sugro and Today’s together refuted the claim that Tesco’s acquisition of the Booker Group will enhance competition and promote consumer interests.
Instead, the group wrote that the deal would give Tesco incontestable power over the procurement in all grocery categories in the UK, while suppliers will find it “even harder to resist Tesco’s demands”.
In the strongly-worded letter, the MDs expressed concerns about the “very future of grocery wholesaling and retailing in the UK” and said it threatens the survival of the independent retailer.
“This merger will not just result in a substantial lessening of competition but in a complete restructuring of the wholesale and retail of groceries in the convenience and foodservice sectors, to the unquestioned detriment of consumers,” the group wrote.
“Companies such as ours, that compete for these supplies, are always disadvantaged. 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.”
While consumer prices could go down initially, once the merger is fully bedded in and the competition is weakened, the group would be able to raise prices, while consumers would also face reduced product range and choice, the wholesalers claimed.
“Adding that, Tesco, with its ability to target lower prices where it faces local competition, would also have the power to force out of business all those independent retailers with which it competes locally” the letter said.
The group said that 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 CMA is in phase two of its investigation into Tesco’s proposed acquisition of Booker Group with the final decision expected just before Christmas 2017.
“In the interests of retaining healthy competition in foodservice supply and grocery wholesaling and retailing, we ask the CMA to block the Tesco-Booker merger,” the letter said.
Signatories included MDs Martin Race of Bestway Wholesale; Andrew Selley of Bidfood; Nicky White of Confex; John Mills of Landmark Wholesale; Debbie Robinson of Spar UK; Philip Jenkins of Sugro UK; John Schofield of Wholesale Services.