Whitby Seafoods has been given five days by the Competition and Markets Authority to demonstrate that its purchase of Kilhorne Bay Seafoods won’t lead to higher prices and lower quality products.
Whitby Seafoods currently holds 90% of the market to supply breaded scampi to foodservice customers such as pubs, restaurants, and fish and chip shops by some distance. It has a market share close to 90%, and Kilhorne Bay Seafoods, while significantly smaller than Whitby Seafoods, is the second-largest supplier.
Whitby Seafoods agreed to buy Kilhorne Bay Seafoods in May this year, and voluntarily notified the deal to the Competition and Markets Authority, which launched a merger review into the deal in August.
An initial Phase 1 investigation conducted by the CMA has found that Whitby Seafoods already holds a very strong market position in the supply of breaded scampi to foodservice customers. Following the deal, Whitby Seafoods would face even less competition from other scampi suppliers. The CMA’s investigation also found that Whitby Seafoods faces limited competition from potential market entrants and suppliers of other types of breaded seafood.
The loss of competition brought about by the deal could result in foodservice customers having to pay higher prices – which could ultimately lead to higher prices for customers in venues such as pubs, restaurants, and fish and chip shops – as well as reduced product quality.
The CMA will refer the deal for an in-depth Phase 2 investigation unless Whitby and Kilhorne Bay offer remedies which fully resolve these concerns. They now have five working days to submit proposals.
Colin Raftery, Senior Director of Mergers at the CMA, said: “Scampi is a popular choice when eating out in the UK, with over 20 million servings sold to restaurant, café, and pub goers every year. These venues are already facing significant cost pressures, and it’s critical that we don’t allow a loss of competition to make things worse.
“Kilhorne Bay is a relatively small player, but Whitby Seafoods already faces only very limited competition when competing for foodservice customers – so the deal would leave customers facing the risk of higher prices and lower quality products.”
