The CMA justified its decision by saying that Booker does not own the shops, such as Londis, Budgens, Premier and Happy Shopper, that it supplies. “These retailers are free to set their prices and decide which products to stock,” said the CMA. “So, although these shops compete with Tesco, Booker cannot directly determine how they compete.”
The competition regulator also examined whether the merged company could raise prices or reduce service quality at either wholesale or retail level. It found that “existing strong competition in wholesale and retail made this unlikely”.
During its investigation, the CMA discovered that a quarter of symbol group retailers and a third of independent shops switched wholesalers at least once a month. “In addition, almost half of symbol group retailers surveyed and more than a third of independent retailers said that if Booker were to raise prices after the merger with Tesco, they might stop buying from Booker altogether. And only around a fifth would continue buying the same volumes from Booker, alongside their other wholesalers.”
The CMA also considered concerns that, after the merger, Booker would be able to use Tesco’s buying power to purchase groceries from suppliers at lower prices and that other wholesalers might not be able to compete. This could lead to Booker eventually raising its prices if the choice didn’t then exist to keep prices competitive. However, the CMA concluded that “the wholesale market would remain competitive in the longer term”, noting that Booker’s share of the UK grocery wholesaling market “was not sufficient to justify these longer-term concerns”.
In response to the CMA’s decision, Tesco simply said: “Tesco welcomes the announcement from the Competition and Markets Authority that it has given unconditional clearance of our merger with Booker Group plc. We anticipate completion in March 2018.”
Booker has yet to comment.