The UK Competition and Markets Authority (CMA) has today formally given unconditional clearance to the anticipated merger between Booker, the UK’s largest wholesaler, and Tesco, the UK’s largest grocery retailer.
The clearance comes nearly 12 months after the deal was announced, and after an in-depth Phase 2 investigation by the CMA. The CMA investigated in detail the potential impact of the merger on food suppliers, on other wholesalers in the market, and on the potential for Tesco and Booker to worsen the offer for customers in areas where there are both Tesco stores and independent grocery stores supplied by Booker. They concluded that “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.”
Simon Gaysford, Director in Frontier’s Retail and Consumer team says, “The food market is changing rapidly. Competition in the sector has always been about finding new ways to serve customers, and rethinking the end to end supply chains that get food to customers. This deal creates new opportunities for two of the biggest food businesses in the UK to serve customers better, and find new avenues for future growth”
Dave Foster, Director in Frontier’s Competition practice says, “This decision marks a new theoretical development for the CMA. Using the model we put forward, the CMA has done its most detailed analysis yet of how to look at the incentive to raise prices in a “vertical” merger, dealing with the fact that Booker does not control the retail stores that compete with Tesco. This was central to the decision, and I expect that it will set the benchmark for how other similar mergers are assessed in future”.
Frontier Economics advises Tesco and Booker on issues of strategy, planning and competition policy.
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