Four months after the deal was first announced, the competition watchdog has today begun an investigation into Tesco’s planned £3.7bn takeover of Booker.
The Competition and Markets Authority (CMA) will assess whether the tie-up could reduce choice for shoppers and for the shops, caterers and small businesses supplied by Booker.
After criticism from some observers over perceived inaction, the CMA has announced the first phase of its investigation, which will run until July 25.
A spokesperson said it had taken a ‘relatively long time’ to start the probe because the CMA has had to collect detailed information about the deal from both Tesco and Booker.
The CMA says it will “assess whether the deal could reduce competition and choice for shoppers and other customers, such as stores currently supplied by Booker”.
It has asked for interested parties (including rival retailers and wholesalers) to submit their views by June 13.
After this first phase, the CMA will either clear the takeover or submit it for a more in-depth investigation, unless Tesco and Booker take steps to counter any competition issues identified. This phase of the investigation, if it goes ahead, is likely to last six months or more.
Among its recommendations, the CMA could force Tesco to sell stores (most likely Tesco Metro c-stores) if it believes the deal will harm competition within the industry. Booker could also be persuaded sell off the Londis and Budgens symbol brands, which it bought from Musgrave in 2015.
As well as raising concerns over competition issues, Tesco’s move for Booker has also been criticised by some of its shareholders.
In March, one of Tesco’s biggest investors, Schroders, warned about the cost of the deal, telling the BBC that the supermarket giant was paying a “premium” and it had “major concerns” about the deal.
Despite increased competition from discounters, Tesco remains Britain’s biggest supermarket with 27.6% of the market in the three months to March, according to Kantar Worldpanel. Under the leadership of CEO Dave Lewis, it has started to bounce back after a period of stagnating sales, as well as an accounting scandal.