Tesco merger approval criticised
even further following the announcement on Friday that its proposed
takeover of convenience store group Adminstore had been approved by
the Office of Fair Trading. But this should be the last Tesco
acquisition permitted by the OFT, according to Friends of the
Earth, if consumer choice is to be adequately protected.
Tesco announced the acquisition of the 45-store Adminstore group back in January just days after unveiling a £1.6 billion war chest and plans to expand its operations both at home and abroad.
But according to FoE, Tesco's dominance of the UK retail market cannot be allowed to continue. The environmental organisation is calling for a moratorium on any further mergers by the UK's largest retailer warning that "consumers will be left with little choice of where to shop if its aggressive takeover plan is not stopped".
Friends of the Earth said that the market dominance of Tesco and the other major supermarkets was having an adverse effect on consumer choice and competitiveness by pushing small retailers and farmers out of business.
"Tesco is the UK's most dominant retailer with over 25 per cent of the market. The Adminstore deal will give Tesco 45 new stores in London where it already controls a third of the grocery market," said FoE. "The OFT said that the takeover would not significantly effect Tesco's existing size and potential for growth. But Friends of the Earth says the decision does not consider the impacts of the piecemeal growth of Tesco which continues to set its sights on chains of small stores."
Sandra Bell, food and farming campaigner for Friends of the Earth, added: "Today's OFT decision makes little sense as it fails to protect consumers, farmers and small businesses from the growing power of the UK's biggest supermarket. Every time Tesco is allowed to take over another chain of stores it strengthens its grip on the UK food market. This leaves shoppers with less choice of where to shop, and weakens the bargaining position of suppliers.
"The government must step in and impose a moratorium on further Tesco takeovers."
FoE's fears were echoed by Carlos Criado-Perez, outgoing chief executive of the Safeway chain which today became part of the Morrisons group. As a result of the takeover, Criado-Perez is to leave the company he has steered through four difficult years and has not held back in criticising other retail groups as a result.
In an interview with the Guardian newspaper this week, he said that he was surprised that the Competition Commission had given the green light to Morrisons rather than to Asda, which he said would have been better able to curb the excesses of Tesco.
Morrisons' takeover of Safeway will lift it rapidly up the retail rankings, but it will still be in fourth place overall and some way behind Tesco. A combination of Asda and Safeway would have created a group more capable of competing with the market leader, according to Criado-Perez, who accused the Competition Commission of playing into Tesco's hands.
With two convenience store acquisitions under its belt already, Tesco is unlikely to stop now - especially since the Competition Commission's ruling on Safeway effectively prevents any of the top three chains from buying any larger groups - and with Sainsbury following a similar route, the concentration of power into the hands of a few retail groups is only likely to continue.
Of course, the OFT will not necessarily give carte blanche to the major chains to move into the convenience sector unchecked, but as long as it continues to view the two markets as separate - arguing, somewhat inexplicably, that convenience stores and supermarkets are not competing formats - the major multiples are likely to continue their drive into this sector.
