Tesco asked to address Carrefour supplier concerns

By Noli Dinkovski contact

- Last updated on GMT

Tesco says its alliance with Carrefour will be governed by a three-year operational framework
Tesco says its alliance with Carrefour will be governed by a three-year operational framework

Related tags: Tesco, Retailers

Tesco has been asked by a parliamentary committee to respond to concerns that its proposed strategic alliance with French retailer Carrefour would damage smaller UK-based food producers.

However, Tesco’s written response to the Environment, Food and Rural Affairs Committee (EFRA), due on 11 July, has been held up, after it emerged EFRA’s letter was addressed to the supermarket’s old Cheshunt address.

Posted on Parliament.UK, the letter, which Tesco claimed it had not received, bears its previous address. Tesco moved its headquarters to Welwyn Garden City in 2015.

In the letter, dated 4 July, EFRA chair Neil Parish MP invited Tesco chief executive Dave Lewis to explain why the supermarket had entered into a strategic alliance with Carrefour, and what the terms of the alliance would be.

When announced at the start of the month, Tesco and Carrefour said the alliance would cover the strategic relationship with global suppliers, the joint purchasing of own-brand products, and goods not for resale.

Concerned that Tesco’s increased buying power could reduce the amount paid to suppliers and producers, EFRA has asked whether the supermarket anticipates reductions in the prices it pays to smaller-scale UK-based food producers over the short to medium term.

The price paid by consumers

In contrast, the committee would like to know to what degree the alliance would lead to reductions in the price paid by consumers on everyday products.

In light of Tesco announcing the alliance would be governed by a three-year operational framework, EFRA is also seeking clarity into its long-term ambitions with Carrefour.

In a separate development, French competition watchdog Autorité de la Concurrence said it would open an inquiry to investigate the impact of the tie-up between Tesco and Carrefour.

Despite the notification of the purchasing partnerships within the required legal timeframe, the Autorité said it would open an inquiry “in order to assess the competitive impact of these purchasing partnerships on the concerned markets, both upstream for suppliers, and downstream for consumers”​.

No plan to investigate the proposed alliance

Meanwhile, an industry source has told Food Manufacture’s​ sister title The Grocer​ that the UK’s Competition and Markets Authority does not plan to investigate the proposed alliance​.

The planned partnership was announced in February and was expected to be formally agreed by April.

The CMA had already approved Tesco’s £3.7bn takeover of Booker, which was completed in March.

It has, however, opened an investigation into the Sainsbury’s-Asda mega-merger, which was announced in May.

Shore Capital head of research Clive Black believed the Sainsbury’s-Asda merger would create a “duopoly” that could seriously harm the interests of manufacturers and consumers​.

Speaking at the Federation of Bakers’ Annual Conference in May, he also slammed the CMA for being “a self-perpetuating, semi-judicial organisation that thinks it’s quite academic – but basically pisses away millions of pounds of taxpayers’ money”.

In response, the CMA said it believed “strongly in an evidence-based process” and would “examine all the relevant facts before reaching a decision”.

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