Anticipated merger between Co-operative Group (CWS) Limited and United Co-operatives Limited

Affected market: Travel agency services, retail pharmacy services, funeral services and grocery retail services

No. ME/3004/07

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 33(1) given on 23 July 2007. Full text of decision published 3 August 2007.

PARTIES

Co-operative Group (CWS) Limited (CGL) is the UK's largest co-operative society with approximately 3.9 million members. It is active in diverse sectors including banking, insurance, property investment, retailing of footwear, travel, pharmacy, funeral services and groceries. CGL's UK turnover for the year ending 13 January 2007 was £7,334 million.

United Co-operatives Limited (United) is a regional co-operative society, based primarily in the north of England and the Midlands. It is active in diverse sectors including motor dealerships, property investment, travel, pharmacy, funeral services and food retail. United's UK turnover for the year ending 27 January 2007 was £2,207 million.

TRANSACTION

The parties propose to amalgamate their respective societies by a transfer of engagements between the two co-operative societies under section 51(1) of the Industrial and Provident Societies Acts. The merger is expected to be completed by registration at the Financial Services Authority by the end of July 2007. The Office of Fair Trading (OFT)'s administrative deadline for this case was 16 July 2007.

JURISDICTION

As a result of this transaction CGL and United will cease to be distinct. The turnover of CGL and United both exceed £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 or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

ASSESSMENT

The parties overlap in the supply of property investment; financial services; travel agency services; pharmacy services; funeral services; and grocery retail services. The OFT believes that no competition concerns arise in respect of property investment, financial services and travel agency services.

In relation to pharmacy services, the OFT applied the method of analysis used in its previous decisions of Boots/Alliance Unichem [see note 1] and Lloyds/IPCC. [see note 2] On this basis, the OFT identified two local areas (Heckmondwike and Orrell) within in a one mile radius that resulted in a substantial lessening of competition.

In relation to funeral services, the OFT applied the method of analysis used in previous OFT and CC decisions [see note 3] including (to the extent possible) CGL/Fairways. [see note 4] Following its analysis, the OFT identified five local areas (Bangor, Belfast, Barnton, West Yorkshire and Sheffield) giving rise to a substantial lessening of competition as a result of the merger.

In relation to grocery retail services, the OFT was guided by the methodology adopted by the CC in Somerfield/Morrisons [see note 5] and The Safeway Report [see note 6] but took into account the totality of the evidence available in respect of local areas, including location maps, fascia counts, store margin data and local customer preferences evidence before reaching its conclusions. On this basis, the OFT identified eight local areas (five paired overlap stores and three non-paired stores) where it believes the merger gives rise to at least a realistic prospect of a substantial lessening of competition.

Consequently, the OFT believes that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.  

DECISION

The OFT therefore believes that the anticipated merger between Co-operative Group (CWS) Limited and United Co-Operatives Limited meets the test for reference to the Competition Commission pursuant to section 33 of the Act. However the OFT's duty to refer is suspended while the OFT is considering whether to accept undertakings in lieu of reference from the parties pursuant to section 73 of the Act.

NOTES

1. Anticipated acquisition by Boots plc of Alliance UniChem plc, 6 February 2006.
2. Anticipated acquisition by Lloyds Pharmacy Limited of Independent Pharmacy Care Centres plc, 8 June 2007.
3. See MMC report on the acquisition by Service Corporation International and Plantsbrook Group plc, 1995; Case No 1044/2/1/04, ME Burgess, JJ Burgess and SJ Burgess v Office of Fair Trading and W Austin and Sons, the Harwood Park Crematorium and the Consumer's Association, 2005 and OFT investigation of the Anticipated Acquisition by Co-operative Group Limited of McIntosh Funeral Directors, 4 April 2006.
4. Completed Acquisition by the Co-operative Group (CWS) Limited of Fairways Group UK Limited, 19 July 2006.
5. CC's report on the acquisition by Somerfield plc of 115 stores from Wm Morrison Supermarkets plc, September 2005.
6. CC's report on Safeway plc and Asda Group Limited (owned by Wal-Mart Stores Inc), Wm Morrison Supermarkets Plc, J Sainsbury plc and Tesco plc, 18 August 2003.

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