morrisons Salford

Competition authorities have warned the recent takeover of Morrisons by MFG’s owner could lead to higher fuel prices in 121 local areas across England, Scotland and Wales.

The Competition and Markets Authority (CMA) raised its concerns after a preliminary inquiry into the £7.1bn takeover of Morrisons by US private equity group Clayton, Dubilier & Rice (CD&R).

The authority said that MFG and Morrisons both have petrol forecourts in all the areas it has identified, and would face only limited competition after the takeover, meaning that the deal could lead to an increase in prices.

Following the takeover, the CMA served an enforcement order on October 26 requiring the companies to operate independently, as they did before the purchase, and it launched a preliminary inquiry in January.

CD&R has been given five working days to offer proposals to the CMA to address the competition concerns identified. The CMA would then have a further five working days to consider whether to accept these in principle instead of referring the case to an in-depth investigation.

Colin Raftery, senior director of mergers at the CMA, said: “Prices for petrol and diesel have recently hit record highs, which makes it even more important that we don’t allow a lack of competition at the pump to make the situation worse.

“We’re concerned that this deal could lead to higher prices for motorists in some parts of the country. But if CD&R and Morrisons are able to address these concerns, then we won’t need to move on to an in-depth investigation of the merger.”

An in-depth inquiry requires a massive amount of management time and expense and most companies in this situation, such as the owners of EG Group when it bought Asda last year and MFG when it bought MRH in 2018, seek to reach a deal to address the concerns.

But in both these cases far fewer local areas were identified. In the MFG/MRH deal the CMA raised concerns about 52 local areas and MFG agreed to sell 38, and in the Asda deal the CMA identified 36 local areas, and they reached an agreement to sell 27 sites.

If CD&R decides it would have to sell off too many sites another option would be to sell MFG in its entirety.

Last month it was reported that CD&R was lining up banks to handle the sale of the forecourt chain, and that Fortress Investment Group, which lost out to CD&R in the sale of Morrisons last year, was preparing a bid for MFG.

CD&R declined to comment.