Competition watchdog concern over UK scampi merger

Two of the UK’s principal scampi producers have been given five working days to show that their planned merger will not lead to higher prices.

The Yorkshire coast company Whitby Seafood and Kilhorne Bay Seafoods of County Down, Northern Ireland want to come together.

But the Competition and Markets Authority (CMA)  has stepped, in expressing concerns that the plan could lead could potentially be price-related, anti-competitive and lead to lower quality products.

It says: “Whitby Seafoods is currently the largest UK supplier of breaded scampi to foodservice customers (such as pubs, restaurants, and fish and chip shops) by some distance, holding a market share close to 90%.

“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 early 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.

It says: “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 said it will refer the deal for an in-depth Phase 2  merger 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.”

He added: “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.”