Affected market: Grocery retailing
No. ME/1271/04
Please note that the full text of the decision can be downloaded from the link on the right. What follows are extracts regarding the parties, the transaction, background, jurisdiction, assessment and decision.
The OFT's decision on reference under section 22(1) given on 26 October 2004
PARTIES
J Sainsbury plc (Sainsbury's) is one of the UK's largest grocery retailers, with 500 stores. Jacksons Stores Ltd (Jacksons) is an independent retailer operating 114 stores in Yorkshire and the North Midlands of which 112 are 'convenience' stores and 2 are 'mid-range' stores. Jacksons' UK turnover for the financial year ending April 2004 was £143 million.
TRANSACTION
Sainsbury's acquired Jacksons by way of a private share agreement on 15 August 2004. The four month statutory deadline expires on 14 December 2004. The 40 working day administrative deadline for the OFT's decision in this case is 26 October 2004.
JURISDICTION
As a result of this transaction Sainsbury's and Jacksons have ceased to be distinct. The UK turnover of Jacksons exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is the case that a relevant merger situation has been created.
ASSESSMENT
The parties overlap in grocery retailing, primarily convenience retailing. Due to the small increment, no national concerns arise as a result of this merger. No local areas have been identified where, as a result of the merger, there will be three or fewer fascia competing with the merged entity post-merger. On this basis, there are not considered to be horizontal competition concerns. Furthermore, in the relevant localities where the parties' activities overlap in the convenience store sector, the OFT believes, having weighed up all the evidence before it, that actual and potential entry is capable of exerting an important competitive constraint on the parties post-merger. No conclusion has been drawn whether the barriers to entry in relation to the two mid-range stores are substantial given that no horizontal concerns have arisen in this case.
The acquisition will lead to only a tiny increment to Sainsbury's upstream buyer power. Although third parties have expressed concerns about Sainsbury's existing purchasing power, any change in its position in this respect as a result of this acquisition is negligible. Furthermore, the evidence before the OFT does not support the argument that the transaction will have an adverse effect on suppliers to any material degree so as to cause significant harm to competition.
Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.
DECISION
This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.
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