The Competition and Markets Authority (CMA) has provisionally cleared the merger between Tesco and wholesale giant Booker.
A panel made up of CMA members found that after the companies “do not compete head-to-head in most of their activities. In particular, Tesco does not supply the catering sector, which accounts for over 30 per cent of Booker’s sales, the report said.
It examined evidence from Tesco and Booker, which represent the UK’s largest retailer and wholesaler respectively, as well as evidence from over 65 wholesalers, suppliers and retail chains, and a survey of hundreds of retailers.
Chair of the inquiry group Simon Polito 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 said it considered the impact of the merger in every local area where a Tesco and a Booker-supplied shop are both present (over 12,000 shops).
It found that it was likely Booker would be able to negotiate better terms from a number of its suppliers for some groceries, and that it was likely to pass on some of the benefits of these savings to the shops that it supplies. This might increase competition in the wholesale market, as well as reducing prices for shoppers, the CMA said.
However, it also concluded that the wholesale market would remain competitive in the longer term, noting that Booker’s share of the UK grocery wholesaling market – at less than 20 per cent – was not sufficient to justify the longer-term concerns.
The CMA opened its phase 1 investigation into the merger in May. At the end of June, the companies requested a ‘fast track’ referral to the next stage of the investigation. Following the provisional decision, the CMA is now inviting further comment and evidence before coming to a final view.
Tesco and Booker’s market share prices jumped by 5.65 and 5.74 per cent respectively after the news this morning (14 November).