The Office of Fair Trading is to probe the tie-up between Costcutter and Palmer & Harvey which has created the UK’s second-largest convenience store chain behind Booker’s Premier.

The OFT said it is studying whether the deal, agreed last month, would create a “substantial lessening of competition” in the market.  

Costcutter chief executive Darcy Willson-Rymer last month told Retail Week the deal would give the buying group, named The Buyco, a combined purchasing power of £5bn. Costcutter now has 2,500 shops in its network, as well as 25 company-owned stores, and Willson-Rymer wants to double this store count.

Willson-Rymer said: “We can confirm that the merger of the Mace stores into Costcutter Supermarkets Group from Palmer and Harvey is being considered by the Office of Fair Trading. We are fully complying with their request for information. 

“The impact on market competition was part of our considerations when completing the deal with Palmer and Harvey and we are therefore confident that the OFT and, should it prove necessary, the Competition Commission will agree with our position.”

He added: “Ultimately, this deal is about bringing together two groups of independent retailers to enable us to get lower prices for all of our members.”