On 12 July 2017 the CMA announced a fast-track referral to Phase II of its investigation into the proposed merger between Tesco plc and Booker Group. This followed a request for such a referral made by the parties on 27 June 2017. The CMA’s approval is a precondition to the closing of the £3.7 billion transaction, which was announced on 27 January 2017. The full text of the decision was published on 21 July 2017.
The CMA’s Phase I decision suggests that it has identified potential competition concerns arising from horizontal and vertical overlaps between Tesco stores and Booker-supplied stores in more than 350 local areas. The CMA considers that shoppers could face worse terms when buying their groceries in these areas. In addition to two local areas where concerns have been identified in relation to horizontal overlaps between Tesco and Booker stores, the CMA has identified potential concerns that in certain geographic areas post-merger, the merged entity may have the ability and incentive to (i) worsen the retail offering in its Tesco stores, such that customers may switch to Booker’s symbol stores, and/or (ii) reduce the wholesale services or terms it offers the Booker symbol group stores it supplies, in order to drive customers to their local Tesco instead. No conclusion was drawn on other relevant issues raised by third parties in light of the fast-track referral. As a result of the fast-track referral, the investigation has passed to a new set of decision-makers − an inquiry group comprised of four of the CMA’s independent panel members. The inquiry group has a 24-week statutory period to issue a Phase II decision, with the decision expected before Christmas 2017.
There have been a number of previous cases where the fast-track procedure has been used, including most recently BT/EE, Ladbrokes/Coral and Central Manchester University Hospitals/University Hospital of South Manchester. For a case to be fast-tracked, two conditions must be met. First, the test for a Phase II reference must be satisfied, namely that the CMA must have a reasonable belief, objectively justified by evidence, that there is a realistic chance of the proposed merger substantially lessening competition inany UK market. Secondly, the notifying parties must have requested and given their consent for the use of this procedure. The parties can request fast-tracking at any point during the course of the investigation.