Convenience store acquisition may give rise to competition concerns
Co-op’s acquisition of the My Local convenience store in Widnes, Cheshire may give rise to competition concerns.
In July and September 2016, Co-operative Foodstores Ltd (Co-op) bought 8 My Local convenience stores after their previous owners went into administration. Co-op already owns grocery stores in all 8 local areas, therefore the Competition and Markets Authority (CMA) examined the risk of competition overlaps in these areas.
The CMA found that the acquisition gives rise to competition concerns only in one area – Widnes, Cheshire – where the Co-op already owns 3 convenience stores in close proximity to each other.
Both the My Local store and Co-op’s existing stores competed closely prior to the Co-op buying the My Local store. The CMA found that, following the acquisition, only one other convenience store in Widnes is likely to compete effectively with Co-op. Other grocery stores in the area will exercise less of a competitive constraint because they sell different products and because customers would need to travel further to reach those stores.
Co-op can avoid the acquisition being referred for an in-depth investigation if it can offer a remedy to address the CMA’s competition concerns in the Widnes area. Co-op has until 26 October to do so.
Sheldon Mills, CMA Senior Director of Mergers and decision maker in this case, said:
In most of the areas where Co-op acquired My Local stores, there was sufficient rivalry from other grocery retailers. However, in Widnes before the merger, Co-op had a strong presence with 3 convenience stores in the local area. Therefore, we believe that the merger may lead to competition concerns.
Notes for editors
The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. For more information on the CMA see our homepage or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on merger cases.
Under the Enterprise Act 2002 (the Act) the CMA has a duty to make a merger reference, resulting in an in-depth phase 2 merger investigation, if the CMA believes that it is or may be the case that a ‘relevant merger situation’ has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and that the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
Under the Act a ‘relevant merger situation’ is created if 2 or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million (‘the turnover test’) or as a result of the transaction, in relation to the supply of goods or services of any description, a 25% share of supply in the UK (or a substantial part of the UK) is created or enhanced (‘the share of supply test’).
The My Local convenience store estate was previously owned and operated by ML Convenience Ltd and MLCG Limited.
The CMA considers that it is under a duty to make a phase 2 merger reference in this case under the Act. However, the duty to refer is not exercised while the CMA is considering whether to accept undertakings in lieu of a reference. Co-op has until 26 October to offer undertakings that might be accepted by the CMA. If no undertaking is offered or accepted, then the CMA will by 2 November refer the merger for a phase 2 merger investigation.
All the CMA’s functions in phase 2 merger investigations are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision makers on merger investigations. The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business; the membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
The text of this decision will be placed on the case page in due course.
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