Tesco’s proposed £3.7bn deal to buy the cash-and-carry group Booker has been referred for an in-depth investigation after the competition watchdog said it could result in higher prices for shoppers in about 350 areas across the UK.
The Competition and Markets Authority said in those areas Tesco overlapped with convenience chains including Londis and Budgens, which were supplied by Booker.
“The CMA believes that in more than 350 local areas where there is currently an overlap between Tesco shops and Booker-supplied ‘symbol’ stores, shoppers could face worse terms when buying their groceries,” the watchdog said, announcing the decision.
“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.”
Tesco operates more than 3,000 stores across the UK, while Booker supplies more than 5,000 stores under the Premier, Londis, Budgens and Family Shopper brands. The proposed deal would turn Britain’s biggest retailer into a major supplier to small retailers, serving 125,000 independent convenience stores as well as 468,000 restaurants and pubs.
The deal was revealed in January and considered to be Tesco’s first major corporate move since it was led by Sir Terry Leahy, who quit in 2011. In recent years, the retailer has been hit by growing competitions from discount chains and an accounting scandal.
Current boss Dave Lewis was parachuted in from Unilever to turn around the business, and under his leadership Tesco reported its first year of sales growth since 2010.
The Booker case will be considered by an inquiry group chosen from the CMA’s independent panel members, who will undertake further research and take evidence from parties potentially affected by the deal.
The panel has 24 weeks to carry out the investigation, which means Tesco and Booker will have a final decision by Christmas, the CMA says. An interim report will be published with provisional findings.
Last month Tesco and Booker requested a fast-track referral to the next stage of the CMA’s investigation to try to speed up the deal.
A spokesperson for Tesco said: “We are pleased the CMA has accepted our fast-track request, and we look forward to continuing our engagement over the coming months.
“This merger has always been about growth, and we remain convinced that it will bring benefits for consumers, independent retailers, caterers, small businesses, suppliers and colleagues.”
