Completed merger between Co-operative Group Limited and Lothan Borders & Angus Co-operative Society Limited

Affected market: Grocery retailing, pharmacy, funeral services and petrol forecourts

No. ME/3933/08

The OFT's decision on reference under section 22(1) was given on 6 March 2009 (the Decision). The full text of the Decision was published on 18 March 2009.

THE PARTIES

1. Co-operative Group Limited (CGL) is the UK's largest co-operative society with some 4.5 million members. It is active in a diverse range of activities including food retail, pharmacy, banking, travel agency, optical services, funeral services, and petrol forecourts. This case involves CGL's food retailing, pharmacy services, funeral services, petrol forecourt and home store businesses.

2. Lothian Borders & Angus Co-operative Society Limited (LBA) is a regional co-operative society, based in Scotland. LBA comprises 65,000 members and is active in diverse sectors including food retail, pharmacy services, funeral services and petrol forecourts. LBA also has one store selling carpets and furniture. 

TRANSACTION

3. In December 2008, LBA transferred its engagements to CGL under section 51(1) of the Industrial and Provident Societies Act 1965. The transaction was completed upon registration by the Financial Services Authority, which occurred on 14 December 2008.

JURISDICTION

4. As a result of this transaction CGL and LBA have ceased to be distinct. The UK turnover of LBA 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 or may be the case that a relevant merger situation has been created.

BACKGROUND

5. The parties overlap in grocery retailing, pharmacy services, funeral directing services and petrol forecourts in Scotland. The Decision concluded that, on the evidence available, 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 UK. Specifically, the OFT has found that there is a realistic prospect of a substantial lessening of competition as a result of the merger in grocery retailing in local areas around 12 LBA stores and in one local pharmacy area.

6. To address the OFT's competition concerns, CGL offered to divest a store/outlet (or stores) in each of the 12 grocery retailing local areas and the one pharmacy services local area identified by the OFT, thereby effectively removing the overlap created by the merger in those markets. With regard to both grocery retailing and pharmacy services, the OFT considers that CGL should have the option to select whether it divests the LBA outlet or the relevant CGL outlet(s) in these local areas.

CONSULTATION

7. On 8 April 2009 the OFT published the proposed undertakings inviting interested parties to give their views on them by 23 April 2009 pursuant to paragraph 2(1) Schedule 10 of the Act.
 
8. The OFT did not receive any responses to its consultation. 

DECISION

9. The Decision concluded that the merger would be referred to the Competition Commission if the parties failed to give suitable undertakings pursuant to section 73 of the Act to address the competition concerns identified in the Decision.

10. The OFT considers that the undertakings are clear-cut and appropriate to remedy, mitigate or prevent the substantial lessening of competition and any adverse effects resulting from it. The OFT has therefore decided to accept the undertakings offered by CGL.

11. The merger will therefore not be referred to the CC and the undertakings, which have been signed by CGL, will come into effect from today.

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