Britain’s competition watchdog is launching a full-scale probe into Tesco’s £3.7bn takeover of wholesaler Booker on concerns it could leave some customers worse off.
The Competition and Markets Authority (CMA) concerns centre on more than 350 local areas where there is an overlap with Booker-supplied franchises such as Premier, Londis, Budgens and Family Shopper.
It said that in these areas shoppers “could face worse terms when buying their groceries”.
Tesco operates more than 3,000 shops across the UK while wholesaler Booker supplies its services to more than 5,000 so-called “symbol” stores under well-known brand names.
“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,” the CMA said.
Tesco revealed in January that it had agreed a surprise deal to swallow up the wholesaler – claiming the takeover would “delight consumers” and result in “better availability of quality food at attractive prices”.
Image: Tesco chief executive Dave Lewis has been leading a turnaround of the business
But the announcement immediately raised questions about the potential effect on competition and the CMA opened a preliminary investigation in May.
Tesco last month requested a “fast-track” move to the next stage of the probe and the watchdog has now outlined the concerns it has about the deal.
The CMA will now carry out an assessment of whether the transaction will reduce competition in an in-depth “phase 2” investigation expected to take 24 weeks.
It will issue provisional findings before publishing a final report before Christmas.
Tesco has been enjoying a recovery under chief executive Dave Lewis and last month reported its best quarterly sales growth since 2010.
But this has been achieved partly through battling to keep prices low in the face of inflationary pressures – with the slump in the pound since the Brexit vote meaning more expensive imports.
The investment in price has seen Tesco make big cuts elsewhere – announcing a total of more than 2,000 job cuts last month at its head office in Hertfordshire and call centre in Cardiff.
Tesco said in a statement: “We are pleased that 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.”
Tesco did not comment specifically on the concern that shoppers could be worse off in 350 areas.