Affected market: Grocery retail
No. ME/1582/04
Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment, and decision.
The OFT's decision on reference under section 22(1) given on 5 March 2004
Please note text in square brackets indicates range inserted at request of parties.
PARTIES
Tesco plc (Tesco) is the UK's largest grocery retailer. Tesco operates a variety of store formats, each of which is active in convenience retailing. Adminstore Limited (Adminstore) is a small private company whose principal activity is convenience retailing predominantly in central London.
TRANSACTION
Tesco will acquire 45 grocery stores operated by Adminstore (the Adminstore stores). The turnover attributable to these 45 stores for the year ended 28 September 2003 is [less than £70 million]. 43 of the stores that Tesco proposes to acquire are small stores (see note 1). Two stores, however, are larger than small stores and smaller than 1,400 square metres (mid-range stores) (see note 2). No large stores (defined as 'one-stop stores' by the Competition Commission (CC) in the Safeway Report) (see note 3) are part of this transaction.
The extended statutory deadline is 5 March 2004.
JURISDICTION
As a result of this transaction Tesco and the Adminstore stores will cease to be distinct. The parties overlap in the supply of grocery retailing in Great Britain and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The OFT therefore believes that it is or may be the case that a relevant merger situation will be 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 two or fewer fascia competing with the merged entity post-merger and there are only three areas where there will be only three competing fascia other than the merged entity post-merger. On this basis, there are not considered to be horizontal competition concerns. Generally, even within central London, barriers to entry for convenience retailing do not appear to be insurmountable. However, within certain localities, it might be difficult to find rental space of a suitable size to operate a profitable small store. 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 Tesco's upstream buyer power. Although third parties have expressed concerns about Tesco's existing purchasing power, any change in its position in this respect as a result of this acquisition is negligible.
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 CC under section 22(1) of the Act.
NOTES
1. Defined by Mintel / IDG definition as convenience stores (of less than 3,000 square foot (280 square metres)): (i) with extended opening hours (including Sundays); (ii) offering a range of products; and (iii) serving a local community.
2. As used in the Executive Director's advice on the proposed acquisition by J Sainsbury plc of 171 Somerfield stores from the Springwater bidding vehicle.
3. The CC report on the proposed acquisitions of Safeway plc and Asda Group Limited (owned by Wal-mart Stores Inc); Wm Morrison Supermarkets PLC; J Sainsbury plc and Tesco plc – A report on the mergers in contemplation (Cmnd 5950).
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