The UK's competition watchdog has given Whitby Seafoods and Kilhorne Bay Seafoods five days to allay concerns their planned merger could result in higher prices and lower-quality products.

The Competition and Markets Authority (CMA), started to investigate the proposed deal in August and said today (4 October) that the first phase of that investigation has raised concerns.

In May, Whitby Seafoods announced it planned to acquire Northern Ireland-based Kilhorne Bay through its subsidiary Kilkeel Seafoods, which is also based in the province. While significantly smaller than Whitby Seafoods, Kilhorne is the second-largest UK scampi supplier.

Whitby Seafoods, a family-owned business based in the seaside town of the same name in northern England, is the largest scampi supplier to the foodservice channel in the UK with a close to 90% market share.

Suggesting the merger could thus push up scampi prices for UK pubs and restaurants, the CMA said today: “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.”

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.”

The CMA said it will refer the deal for an in-depth Phase 2 investigation unless Whitby and Kilhorne Bay offer remedies that fully resolve these concerns. They now have five working days to submit proposals.

Just Food has asked Whitby Seafoods for its response to the CMA’s announcement.