Tesco Booker deal gets go ahead from regulator

Tesco Booker Wholesale CMA Retail
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Tesco’s takeover of Booker Wholesale has been confirmed by the Competition and Markets Authority without any reservations.

The regulator denied concerns by wholesalers and symbol groups that the deal would give Tesco the ability to harm its rivals through its newly acquired wholesale arm.

Despite acknowledging that a combined Tesco-Booker would represent 46% of the grocery retail sector, CMA inquiry group chair Simon Polito said competition “is sufficiently strong” to ensure the deal “Will not lead to higher prices or a reduced service for supermarket and convenience shoppers.”

One of the major concerns for independent retailers previously highlighted by the regulator were fears that Tesco would increase Booker’s wholesale prices to independent retailers in order to drive sales in its Tesco Express and One Stop stores. The CMA has denied this could happen, believing that retailers would change symbol groups or seek new suppliers if prices increased.

The other major concern outlined by critics of the deal was “a waterbed effect,” where the merged company’s buying power would force suppliers to increase their prices to other wholesalers. An open letter by rival wholesalers said this will: “Present independent retailers with a stark choice: Join a Booker/Tesco symbol or go out of business.”

The regulator accepted that Booker Wholesale’s prices would be lower than rivals in some areas due to the deal, but did not acknowledge the impact on Booker’s retail customers, only on consumers. The assessment stated that it is  “Likely that a proportion of these better terms would be passed on to customers, making the merged entity a more effective competitor.”

Booker Wholesale said it was pleased the transaction has been “provisionally concluded” and said it would “continue to work with the CMA.”

Retailers respond

Adam Salt from Simply Local Lochgelly told Retail Express:  " I Didn’t for one second think it wouldn’t be approved. Time will tell if it’s a good thing, we will just have to wait and see."

Amit Patel from Belvedere News, Food and Wine in Kent comments: "If you are an independent, then not so great news, but if your Londis or Premier then huge scope and potential going forward." 

"My only concern would be for local suppliers that supply Bookers, will Tesco dictate what price they are willing to pay for their goods and squeeze their margins even more," says Patel.

Those opposing or supporting the deal have until “early December” to try and influence the deal through writing to the CMA. The regulator’s final decision will then be published by December 26 at the latest. Tesco said it expects the deal to conclude in early 2018.

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By Jack Courtez Avatar
By Jack Courtez 14 Nov, 2017



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