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Wed 20th Dec 2017 - CMA clears Tesco’s purchase of Booker
CMA clears Tesco’s purchase of Booker: The Competition and Markets Authority (CMA) has concluded Tesco’s purchase of Booker does not raise competition concerns. The CMA stated: “A group of independent CMA panel members has examined all submissions received since its provisional findings before coming to its final view. This follows an in-depth examination of evidence from a large number of wholesalers, suppliers and retail chains as well as a survey of hundreds of retailers. Tesco, as a retailer, and Booker, as a wholesaler, do not compete head-to-head in most of their activities. However, since Booker supplies shops – such as Premier, Londis and Budgens – that do compete with Tesco, the group considered the impact of this carefully. Booker does not own the shops it supplies and these retailers are free to set their prices and decide which products to stock. So, although these shops compete with Tesco, Booker cannot directly determine how they compete. 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 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. In addition, almost half of symbol group retailers surveyed and more than a third of independent retailers said if Booker was to raise prices after the merger with Tesco, they might stop buying from Booker altogether. And only about a fifth would continue buying the same volumes from Booker, alongside their other wholesalers. The CMA also considered concerns, after the merger, Booker would be able to use Tesco’s buying power to purchase groceries from suppliers at lower prices and other wholesalers might not be able to compete. This could lead to Booker eventually raising its prices if the choice didn’t then exist to keep prices competitive. But the CMA concluded the wholesale market would remain competitive in the longer term, noting Booker’s share of the UK grocery wholesaling market was not sufficient to justify these longer-term concerns. The CMA also noted if Booker could get keener prices for its goods from suppliers, this might actually intensify competition in the wholesale market, leading to cheaper prices for the shoppers and caterers Booker supplies.” Simon Polito, chair of the inquiry group, said: “We have carefully listened to feedback from retailers and wholesalers who operate in what are highly competitive UK retail and wholesale sectors. Retailers have told us they shop around for the best prices and service from their wholesaler, and we are confident 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 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.” 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. Tesco stated: “Tesco welcomes the announcement from the Competition and Markets Authority that it has given unconditional clearance of our merger with Booker Group. Subject to the approval of the UK Listing Authority, it is expected the Tesco shareholder circular and prospectus will be published during the week commencing 5 February 2018. Subject to the approval of the court, it is expected the scheme circular will be published by Booker at the same time. We anticipate respective shareholder meetings towards the end of February, and completion in March.”


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