Tesco’s £3.7bn takeover of food wholesaler Booker has been provisionally cleared by the UK’s competition regulator.
The Competition and Markets Authority (CMA) said the deal could even increase competition in the wholesale market and reduce prices for shoppers.
It added that Tesco and Booker did not compete head-to-head in most of their activities.
In particular, it said Tesco does not supply goods to the catering sector.
Tesco is the UK’s biggest supermarket, with a market share of about 28%. Booker is the UK’s largest food wholesaler, and also owns the Premier, Budgens and Londis store brands.
The CMA found that it was “likely Booker would be able to negotiate better terms from a number of its suppliers for some of its groceries, and that it was likely to pass on some of the benefits of these savings to the shops that it supplies”.
“This might increase competition in the wholesale market, as well as reducing prices for shoppers.”
The CMA concluded that the wholesale market would “remain competitive in the longer term” , because Booker’s share of the UK grocery wholesaling market, at less than 20%, “was not sufficient to justify the longer-term concerns”.
Simon Polito, chair of the CMA’s inquiry group, said: “Our investigation has found that existing competition is sufficiently strong in both the wholesale and retail grocery sectors to ensure that the merger between Tesco and Booker will not lead to higher prices or a reduced service for supermarket and convenience shoppers.”
Tesco and Booker both welcomed the CMA’s provisional decision and added that they would continue to work with the competition regulator, which is due to publish its final report by the end of the year.
Booker said it was “pleased that the CMA has provisionally concluded that this transaction does not lessen competition”.
Tesco said it anticipated the merger would be completed in early 2018.
The retail industry is undergoing a period of consolidation. A shift in shopping habits, fierce competition from the likes of Aldi and Lidl, and the arrival of Amazon has prompted retailers to look to bolster their businesses by buying food wholesalers.
On Monday, shareholders in the Nisa convenience store group approved the company’s £137m takeover by the Co-operative Group.