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The OFT yesterday referred the completed acquisition by Booker Group plc (Booker) of Makro Holding Limited (Makro) to the Competition Commission for further investigation due to concerns that it could reduce competition between cash and carry outlets.

Booker and Makro are both major national cash and carry wholesalers to independent retailers and caterers. The cash and carry market is worth an estimated £11 billion in the UK.

The OFT's investigation found that the acquisition raised competition concerns at the national level, where the evidence available to the OFT showed that the merger parties are close competitors in the supply of grocery products to caterers. The OFT has found that many caterers rely on cash and carry outlets. The merger brings together two close cash and carry competitors and reduces the number of national operators from four (Booker, Makro, Bestway and Costco) to three.

Additionally, the OFT has found competition concerns in 13 local areas where the parties overlap. This finding was based on the results of a survey of around 4,000 customers across 22 local areas, as well as other evidence including area-specific analysis.

On the evidence available, the OFT considered Booker and Makro to be close competitors in these 13 local areas and could not be confident that suppliers in alternative distribution channels such as delivered or specialist wholesalers would provide sufficient competition to prevent Booker from raising prices or reducing service for both caterer and retailer customers across these local areas.

The OFT also considered the possibility that there may be competition concerns arising from the merger in other local areas, or at the national level for sales to retailers. It did not need to conclude on this point as this issue can be considered by the Competition Commission in its investigation.

Amelia Fletcher, OFT Chief Economist and Decision Maker in this case, said:

'This merger brings together two of the main cash and carry wholesalers in Great Britain. This is a sizeable market which provides a key service to the independent retail sector and to a variety of catering businesses. We are concerned that the loss of rivalry due to the merger may result in higher prices or a reduction in service to both retailers and caterers, and ultimately to consumers. Although the parties did offer to divest some outlets to address some local area concerns, it was not sufficient to remove our competition concerns at the national level or indeed all of the local areas in which we have concerns. We are therefore referring the merger for a fuller investigation to the Competition Commission.'

NOTES

1. The Reference Test - The OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that a relevant merger situation has been or will be created, and as applicable, the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services. 
2. Under the Enterprise Act 2002 a relevant merger situation is or will be created if two or more enterprises have ceased or will cease to be distinct enterprises, and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced. 
3. The current date by which the Competition Commission is expected to report is 24 April 2013.The Competition Commission may extend the 24-week period within which it is required to publish its report by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period. 
4. The text of this decision will be published in the mergers section as soon as is reasonably practicable.