Tesco urges watchdog to speed up probe

Tesco and Booker have asked the competition watchdog to '˜fast-track' its investigation into their £3.7bn merger, confirming that the deal is expected to face an in-depth probe.

Dave Lewis of Tesco
Dave Lewis of Tesco

The Competition and Markets Authority (CMA) had been expected to complete the first phase of its investigation by July 25, but the two firms have requested it speeds up referral to a more in-depth second phase.

In a stock market announcement, Tesco said: “Following continued constructive dialogue and further to the commencement of the CMA’s Phase 1 review on May 30 2017, we have now requested that the CMA uses the ‘fast-track’ process to allow it to move more quickly to examining the merger through a detailed Phase 2 process.

“We expect the CMA to issue an early decision to refer to Phase 2 within the next two weeks.”

If the CMA proceeds with a fast-track procedure, it would expect to issue a phase 1 decision in the next 10 working days.

The statutory timetable for phase 2 would be 24 weeks, the CMA said.

The watchdog is assessing whether the deal, announced in January, could reduce competition and choice for shoppers.

Booker is the country’s largest wholesaler and owns Londis and Budgens as franchised outlets.

Tesco has faced criticism from investors over the move, with some shareholders branding the takeover tilt a “distraction” and urging the Big Four grocer to scrap it.

The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries. It also enforces competition and consumer law.

Earlier this month, Tesco reported its strongest UK quarterly sales performance in seven years, in the face of rising inflation.

UK like-for-like sales in the first quarter of the year rose 2.3 per cent, driven by a 2.7 per cent comparable sales growth in food.

The figures represent the sixth consecutive quarter of positive sales momentum and prompted one analyst to claim that Tesco has got its “customer mojo” back.

Tesco said sales were boosted by its fresh food offering, which saw “significant market outperformance”.

Chief executive Dave Lewis said: “In tough market conditions, we have stayed true to our commitment to helping customers, working closely with our supplier partners to keep prices low.

“Customers have responded by doing more of their shopping with us and as a result we continue to grow volumes, particularly in fresh food.”

The group said it is working with suppliers to protect customers from inflationary pressures and pledged shoppers will see further price reductions, focused on fresh food and healthy products.

Phil Dorrell, a partner at Retail Remedy, described the update as a solid set of like-for-likes, which fly in the face of struggling volume sales for UK grocers.

He added: “Tesco are on a roll getting their customer mojo back; stores are more engaging and comparatively better value than they were a year ago.

“Customer-centric decisions have helped grow sales six quarters on the bounce. For Lewis, fixing the operation is not enough however, and he is hell-bent on regaining the power of previous decades, and realises corporate relationships is the key.”