The government’s competition authority has said it is not credible to link Palmer & Harvey’s fall into administration with its controversial decision to give the go-ahead to the Tesco-Booker merger.
Despite news of P&H’s demise being announced just days after the Competition & Markets Authority (CMA) gave the provisional go-ahead for the Tesco takeover, it said it could find “no direct link” between the two events.
The CMA said it would consider new evidence following the administration in its final report, but its response appeared to indicate it was unlikely to change its mind, giving opponents only until 5 December to raise fresh objections as a result of the wholesaler’s collapse.
Earlier in its probe into the £3.7bn merger, the competition authority promised a thorough investigation into the possible impact on P&H of Tesco swallowing up larger rival Booker, despite the relationship between Tesco and P&H having been extended for a further three years in a distribution agreement signed in March 2017.
The CMA said in July it had received complaints from a number of third parties about the potentially crushing impact of the merger on the P&H businesses, as the Tesco contract represented around 40% of the wholesaler’s overall operations.
At the time, the CMA said opponents to the merger had warned that Tesco removing its businesses could result in the “foreclosure of P&H leading to a potential loss of competition”.
Yet the CMA ruled in its provisional approval of the Tesco deal earlier this month that the threat was not enough to result in a serious lessening of competition. It said P&H’s combination of multiple, symbol, multi-site and other retailers including independents, combined with its strength in tobacco, meant it could survive.
The CMA told The Grocer it had examined the likely effect on competition in grocery wholesaling in the event that Tesco was to move its wholesaling requirements away from P&H, including looking at the effect on competition at wholesale level. It also considered P&H’s particular strength in tobacco.
Sources at the regulator stressed it was well known that P&H had been facing financial issues for several years and also pointed out Tesco had not terminated its contract with the supplier before its administration was announced.
However, the CMA said it would look at how P&H entering into administration affected its analysis and findings. Its final report would detail any subsequent changes to its findings, it said.
The chances of a u-turn appear thin, however. Sources suggest the CMA finds it “not credible” that P&H going into administration was due to its decision, rather than the longer-term issues facing the company.
A CMA spokewoman said: “It is not for the CMA to comment on why Palmer & Harvey entered into administration. However we find no direct link with the announcement of the CMA provisional findings of the Tesco-Booker merger.”
No comments yet