It was always going to come to this. Today, the Competition & Markets Authority confirmed it was moving to a phase two investigation into Tesco’s proposed £3.7bn takeover of the UK’s biggest wholesaler, Booker.
It was no surprise given both Tesco and Booker had called upon the CMA to fast-track this process last month, and most observers had been predicting this outcome from the moment the deal was announced in January.
The parties’ lawyers have been working tirelessly with the CMA since the announcement in a bid to avoid such an investigation – or at the very least minimise its impact – and it certainly looks like that is where we are right now.
Indeed, even the push to fast-track the process appears to be a move by Tesco and Booker to keep the train heading in the right direction as far as they are concerned. In the process, they hope to reduce the time available for both the investigations panel and rivals to throw any further spanners in the works.
Hotspots
The CMA said today it had identified 350 local hotspots where there was currently an overlap of Tesco stores and those supplied by Booker. This tallies with research carried out for The Grocer in February by Maximise UK, which found about 400 Tesco and Booker stores that were either within a one-mile radius or a five-minute drive of each other. Of these, 246 were deemed to be most likely to be an issue for the watchdog.
A commitment from Tesco to sell off 350 stores, if it comes to that, may well look like a price worth paying for a deal widely viewed as transformational for the UK’s biggest grocer.
However, the more surprising detail in the CMA announcement today was that ”there are concerns that, after the merger, there is potential for Booker to reduce the wholesale services or terms it offers the ‘symbol’ stores it currently supplies, in order to drive customers to their local Tesco”.
This seems to fly in the face of previous rulings it has made. When dealing with Booker’s acquisition of the Londis and Budgens business from Musgrave or the Costcutter-P&H tie-up, it came to the conclusion that the relative ease with which independent retailers can switch wholesalers or symbol group meant there was unlikely to be a negative impact on said retailers.
The CMA also revealed that other concerns had been flagged up to it in phase one, but said it had not found it necessary to conclude on all of these given the ‘fast-track’ referral.
Tesco and Booker’s rivals, many of whom The Grocer understands have submitted detailed objections to the deal, will be hoping the CMA can find the time during the 24-week phase two process to give all of these thorough consideration – rather than simply focusing on 350 locations and an issue it already appears to have a strong opinion on.
Because if this is the full scope of the probe set to conclude just before Christmas, then it looks like a very merry festive period indeed for Messrs Lewis and Wilson.
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