Grocery and general merchandise retailer Tesco’s planned £3.7bn merger with food wholesaler Booker Group has received provisional clearance from the UK’s Competition and Markets Authority (CMA).
The transaction was announced in January, following which concerns were raised on the grounds of competition.
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The regulator investigated how the merger would impact competition.
Following the investigation, CMA found that Tesco and Booker are not direct competitors in most of their business activities in general and the catering sector in particular, to which the former does not supply, while more than 30% of the latter’s sales come from the segment.
CMA inquiry group chair Simon Polito said: “Millions of people use their local supermarket or convenience store to buy their groceries or essentials. Strong competition in the market ensures that shoppers can choose the best deal for them.
“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.”
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By GlobalDataTaking into consideration the competition between Tesco’s stores and Booker-supplied shops, the panel studied the impact of the merger in every local area where such outlets are located.
The objective was to examine whether it would be profitability for the merged company to increase prices or reduce service levels.
Pointing to the level of competition in the grocery wholesale and retail markets, the watchdog has provisionally concluded such a strategy would not have a significant impact.
The CMA also allayed fears expressed by several competing wholesalers that Booker would stand to benefit from better suppliers’ terms once the merger is completed, making it difficult for them to compete.
However, the regulator contended that Booker was likely to pass on some of the benefits to the shops that it supplies, resulting in increased competition in the wholesale market, as well as reduced prices for shoppers.
