Tesco-Booker acquisition cleared by CMA

by TnP Staff
Published: 20 December 2017, 10:09
Quick Link: www.toysnplaythings.co.uk/qapqv

The Competitions and Markets Authority gives Tesco shareholders the greenlight to vote on takeover of the wholesaler

Tesco's £3.7bn purchase of wholesaler Booker has been cleared by the UK's competition regulator.

The Competition and Markets Authority has given the deal its stamp of approval following an in-depth, seven-month review of the impact on the market.

The CMA found that despite both Tesco and Booker's position as leading grocer and wholesaler respectively, the move is unlikely to have a negative impact on consumers, or affect product price or quality.

Although Booker supplies both Tesco and the supermarket's rivals such as Premier and Londis, because the two companies do not directly compete in most of their business activities the competition watchdog concluded that it would not be able to impact how rivals competed.

"Booker does not own the shops it supplies and these retailers are free to set their prices and decide which products to stock," the CMA said.

"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.

"During the course of its phase 2 investigation, the CMA surveyed hundreds of retailers which showed that most shops use more than one wholesaler and frequently switch. A quarter of symbol group retailers and a third of independent shops switched at least once a month."

The inquiry also considered the increased purchasing power of  the merged companies, but found if Booker could get better rates for goods it might actually increase competition and drive prices for shoppers down across the board.

"We have carefully listened to feedback from retailers and wholesalers who operate in what are highly competitive UK retail and wholesale sectors," said Simon Polito, Chair of the inquiry group. "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."

Tesco shareholders are now free to vote on the takeover. The supermarket said it expects shareholders to meet in Feburary 2018, with a view to complete the transaction in March.